Record low mortgage rates are being set in the United States as the rate for a 30-year fixed loan fall from 4.09 percent to 4.01 percent in the span of one week. The rate on an average 15-year loan dropped from 3.29 percent to 3.28 percent, making them some of the lowest rates large companies have seen since the 1970s. These falls were the result of a new announcement by the Federal Reserve delcare their plan to further reduce borrowing costs.

The central bank has announced that it will begin a program that is aimed at lowering mortgage rates while boosting the economy. The program, called Operation Twist, will replace the Feds short-term securities with longer-term debt. There are also plans to reinvest mature housing debt into mortgage-backed securities, which is hoped to have a positive impact on the home loan market.

Senior U.S. Economist at Capital Economics in Toronto, Paul Dales, says “Mortgage rates have fallen some ways already, but they probably haven’t fully caught up with the decline in the 10-year Treasury. It’s possible the effects of Operation Twist will drag 10-year yields down further, thereby weighing on mortgage rates more.”

While many homeowners take advantage of the lower borrowing costs in an attempt to lessen their monthly payments, these declining interest rates have not done much to stimulate the housing market. Unemployment remains above 9 percent and the number of contracts to purchase has fallen during recent months.

Photo courtesy of Loan Mortgage Credit