Good news for folks looking to buy a Boston pad of their own. Fixed mortgage rates have fallen to record lows and may be headed even lower.
According to mortgage buyer giant Freddie Mac, the rate on a 30-year loan has dropped to 3.40%, down from 3.49%. These are the lowest rates seen since long-term mortgages were instituted more than 60 years ago.
While the rates are extremely attractive, they do come with a catch. The new low rates do not include fees, such as points that borrowers often must pay to get the lowest rates. One point equals 1 percent of the loan amount.
Last week the average listing price for Boston homes for sale was $872,410. That means a potential homebuyer would need to pay $8,724.10 for each point needed in order to qualify for the lowest mortgage rate. Currently, the average fee for 30-year loans was 0.6 point.
The lower rate average is due to the Fed buying $40 billion a month in mortgage-backed securities. By doing so, the hope to lower mortgage rates, thereby helping the beleaguered housing industry recovery.
Ben Bernanke, Fed chairman has gone on record to say that the buying program will continue until there is substantial improvement in the job market. This has led some economists to predict that mortgage rates will fall even further in coming weeks.
The Fed’s strategy seems to be working. Across the country, home sales and home prices are up from last year. In Boston, the median sales price for homes from June to August was $516,750, an increase of 3.4%, over the previous quarter and an increase of 1.9% compared to the same time last year.