Rates Down .5% to .6% Since Fed Ended MBS Buying March 31 (CHART)

Below is a chart from Mortgage Market Guide showing 4% coupon Fannie Mae 30 year mortgage backed securities trading for the last 6 months. Currently, this is the most common benchmark lenders use to price consumer mortgage rate sheets daily. When these bond prices rise, rates fall, and vice versa. Note the drop in prices leading up to the March 31 expiration of the Fed’s 15 month, $1.25 trillion mortgage bond buying program. The Fed was buying mortgage bonds to drive rates down and stop the great recession from becoming a depression. When this was coming to an end, you can see here MBS sold off and rates rose. But then the European debt crisis set in, inflation has been nonexistent, GDP is ok but shaky, and consumer sentiment and jobs also shaky (scroll to data section for current stats).

The result is mortgage bonds have risen to record levels, pushing 30yr fixed rates (on single family home loans up to $417k) down to new record lows: they were around 5% late-March and around 4.5% today. It’s unsustainable, but unquestionably favorable for those who qualify for home loans in this rigid underwriting environment.