We now have the lowest rates in a month.
Experts say rates should head up from here.
Rates on fixed-rate mortgages dropped sharply in the past week, after the Federal Reserve took several historic steps to shore up the financial markets. The rate on a 30-year loan dropped to an average of 5.87%, down from 6.13% a week ago, according to new Freddie Mac figures released Thursday. A 15-year mortgage now can be had for 5.27%, down from 5.60%
Mortgage rates had been climbing since mid-February as investors turned away from securities backed by traditional loans issued by Fannie Mae and Freddie Mac. This market had remained fairly stable throughout the mortgage meltdown, which started last summer and made it much tougher and more expensive to get subprime and jumbo mortgages.
But even traditional mortgages became costlier after investors started to question the value of these agency securities when Fannie and Freddie reported a combined $6 billion in losses last month. Then, financial fund Carlyle Capital announced its lenders wanted more money to make up for the depressed value of the agency mortgage-backed securities Carlyle had put up as collateral for loans.
In the past week, the Federal Reserve worked to calm the markets by taking a series of steps, including allowing investment banks to borrow funds and put up mortgage-backed securities as collateral. Also, it backed JPMorgan Chase’s fire-sale purchase of Bear Stearns and cut the interest rate by three-quarters of a point. Finally, regulators enabled Fannie and Freddie to invest more in mortgages by lowering the amount of capital they have to hold as a reserve against potential losses.