Mortgage Rates Fall to Four-Year Low

Mortgage rates fell to a four-year low recently, a day after the Federal Reserve cited a weakening economy in its emergency reduction of its benchmark interest rate. The drop could encourage as many as 7 million homeowners to apply for new mortgages, many to avoid resets of ARMs, said a chief bond market strategist, in a report. Lower monthly payments would put money in their pockets and encourage consumer spending, he said. The average rate for 30-year fixed mortgage fell to 5.31%, the lowest since March 2004, when the Fed's benchmark rate was 1%, according to Bankrate research firm. Fixed rates are set by investors in mortgage-backed securities based on their economic and inflation expectations. Homeowners will face more hurdles this time around in obtaining the loans, said the VP of research and economics for the Mortgage Bankers Assn. Mortgage applications in the U.S. jumped to an almost 4-year high, propelled by a surge in refi, the MBA said in a study published recently.