Mortgage rates sink again

Home mortgage rates continued to march lower, according to two separate reports released on Thursday.

The average 30-year fixed mortgage rate sank to 5.13%, down from 5.19% the week prior, according to Bankrate.com's weekly national survey.

The average 15-year fixed-rate mortgage fell to 4.73% from 4.80% the week prior, according to Bankrate.com.

Bankrate obtains its data by surveying the top 10 banks and thrifts in the top 10 markets every Wednesday.

Meanwhile, a report from Freddie Mac showed that the 30-year fixed-rate mortgage fell to 4.78% in the week ending April 2, down from 4.85% the week prior.

The 4.78% rate is the lowest on record according to the Freddie Mac survey, which dates back to 1971 for that particular mortgage. The 30-year fixed rate averaged 5.88% at this time last year, according to Freddie Mac.

Freddie Mac reports the 15-year fixed rate mortgage fell to 4.52%, down from last week when it stood at 4.58%.
0:00 /3:17Housing on the rebound?

There is a difference in reported rates between Bankrate and Freddie Mac because lending rates are constantly fluctuating and the surveys are conducted at different moments.

The two agencies also report the rates with a different average number of "points," which borrowers can purchase at closing to buy down their lending rates. Therefore, the more points a borrower purchases up front, the lower the lending rate. Bankrate.com's averages have fewer points than Freddie Mac's average.

While rates are already very low, one analyst said that they could potentially dip a little bit more. "They could dip maybe another 20 basis points from where they are, but not a huge amount," said Brian Bethune, chief financial economist at IHS Global Insight.

Bethune also said that he thinks mortgage rates will stay low for a while. "I wouldn't expect them to necessarily jump back up again, but it all depends on the path of the economy."

Mortgage rates follow Treasury rates: No matter which report you look at, the consensus is that mortgage rates are low. The 30-year fixed mortgage rate moves in correlation with the yield on the 10-year Treasury bond. Therefore, lower the yields on government debt weighs on mortgage rates.

"Rates are just coming down as a catch up phenomenon because the 10-year Treasury has come down by 25 to 30 basis points in the past couple weeks," said Bethune. The yield on the benchmark Treasury dropped after the government announced its massive debt-repurchase plan in an effort to encourage lending and spur recovery in the housing market.

The government said two weeks ago that it would be buying more than $1 trillion in debt in an effort to provide liquidity in the credit markets. With the key lending rate already at a range of 0% to 0.25%, the Federal Open Market Committee - the policymaking committee of the Fed that sets interest rates - turned to less traditional means to encourage lending.

"Once we start to see a recovery, the Federal Reserve will start to reverse a lot of its liquidity programs," said Bethune. "We will see rates move up simply reflecting the anticipation that the Fed is going to start to pull liquidity out of the system."

But Bethune said that he expects the economic recovery to be slow, and rates should not move up significantly until 2010.