Rates Below 5% as Homebuyer Tax Credit Deadline Looms

Mortgage ratesThe rate on the 30-year fixed mortgage stayed under 5 percent for another week, but most economists see rates moving upward later in the year as the economic recovery takes a stronger foothold and the Federal Reserve unwinds it purchases of mortgage-backed securities.
The 30-year fixed rate averaged 4.95 percent for the week ending today, down slightly from 4.97 percent the previous week, according to Freddie Mac’s weekly report.
The low rate bodes well for those hoping to meet next month’s deadline for the homebuyer tax credit – for both first-time buyers and current homeowners under certain conditions.
The 30-year fixed rate was at 5.03 percent a year ago. The record low was 4.71 percent in early December, based on Freddie Mac records dating back to 1971.
The 15-year fixed-rate mortgage averaged 4.32 percent down from 4.33 percent the prior week.
A rate below the key 5 percent level is significant as the housing market has weakened in recent months as high unemployment persists and severe winter weather caused a sharp drop in existing home sales for January.  
The National Association of Realtors reported a 7.6 percent drop in its index of pending sales of existing homes January.
Federal Reserve officials have signaled they will keep the benchmark federal funds interest rate at near zero for an “extended” period of time, as the current policy outlook has stood for several months.
But at least 2 out of the 10 Fed board members that sit on the Federal Open Market Committee have said that the policy should be at least re-addressed. The FOMC has the power to raise rates and will meet again this month.
The two officials raise concerns of contributing to inflation and harmful market speculation by maintaining the current rate posture too long, especially if the economic recovery picks up strength in the next few months.

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