Zillow, Inc. (NASDAQ: Z) reported today that mortgage rates have fallen back to record lows this week. The report showed that 30-year fixed rate mortgages fell to 3.34% from 3.38% at the same time last week. Zillow showed that the 15-year fixed mortgage was down at 2.71% and that a 5/1 adjustable rate mortgage was 2.45%.
Zillow’s Lauren Riefflin wrote, “After peaking at 3.46 percent on Wednesday, the 30-year fixed mortgage rate dropped to 3.33 percent and hovered between 3.36 and 3.39 percent over the weekend, dropping to the current rate this morning.”
It should be rather obvious as to why rates fell so much. The Federal Reserve’s QE3 was called “a more aggressive stimulus plan than most anticipated” even if the market did expect some stimulus. Making QE3 unlimited and open-ended on the dates along with extending the exceptionally low rates out to at least mid-2015 were the key points. Zillow said that rates would likely be flat this week as the economic news will probably be overshadowed by QE3′s impact.
The question remains about how willing banks and lenders are going to be to lend at such low rates. With rates this low, they have to rely on more and more fees in the mortgage process and they must have a highly liquid mortgage-backed securities market so that they can offload their mortgages written and be able to keep lending for new mortgages. With QE3 being directed by $40 billion per month at MBS that is at least a better chance.
JON C. OGG