Mortgage rates continue to fall
Freddie Mac says 30-year mortgage rates averaged 5.53% this week as the government pumps more money into the economy.
| 30 yr fixed mtg | 5.06% |
| 15 yr fixed mtg | 4.64% |
| 30 yr fixed jumbo mtg | 5.91% |
| 5/1 ARM | 4.20% |
| 5/1 jumbo ARM | 4.75% |
NEW YORK (CNNMoney.com) -- Mortgage rates fell this week, reaching levels not seen since January, as the government steps up its efforts to aid the ailing housing market.
Government sponsored mortgage lender Freddie Mac said Thursday that fixed rates on 30-year mortgages averaged 5.53% for the week ending Dec. 3. That's down from 5.97% last week and below the 5.96% rate at this time last year.
The 30-year rate has not been this low since January 24, 2008, when it averaged 5.48%.
While long-term mortgage rates declined on average this week, they have increased modestly over the last few days.
The 30-year rate averaged 5.5% on Monday. It increased to 5.54% on Tuesday and to 5.75% on Wednesday, according to data from HSH Associates, the nation's largest publisher of mortgage and consumer loan information.
Still, rates have held steady below 6% since Monday, Nov. 24, marking the longest string of days in this range since February, said Keith Gumbinger, vice president of HSH Associates.
"It looks like we've shifted into a new range," Gumbinger said. Going forward, he thinks rates will "bounce around below 6%."
The declines come as the government has taken dramatic steps to revive lending and make mortgages more affordable.
The Treasury Department is considering a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5%.
Last week, federal officials announced plans to inject $800 billion into the economy in an attempt to revive lending by banks to consumers and small businesses.
As part of that plan, the Federal Reserve could use up to $500 billion to buy mortgage-backed securities that have been backed by the three government-sponsored mortgage finance firms, including Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500).
Mortgage rates plummeted and applications for mortgages and refinances surged a day after the plan was announced.
But Gumbinger warned that the Treasury's plan to drive down mortgage rates could have "all kinds of unintended consequences."
"We have more questions than answers at this point," Gumbinger said. As it stands the plan's logic is questionable, he added.
"You're borrowing your own money to finance your own mortgage," Gumbinger said. 
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