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Mortgage Rates Plunge to Lowest Levels in Months

Mortgage interest rates continued to drop as markets reacted to the news that the Federal Reserve will keep up its stimulus program for the time being.

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According to ""Freddie Mac's"":http://www.freddiemac.com/ Primary Mortgage Market Survey, the average interest rate for a 30-year fixed-rate mortgage (FRM) was 4.32 percent (0.7 point) for the week ending September 26, down to the lowest level since the week ending July 25. A year ago, the 30-year FRM averaged 3.40 percent.

The 15-year FRM this week averaged 3.37 percent (0.7 point), down from 3.54 percent previously.

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Adjustable rates were similarly affected. The 5-year Treasury-indexed adjustable-rate mortgage (ARM) averaged 3.07 percent (0.5 point), down from 3.11 percent previously. The 1-year ARM averaged 2.63 percent (0.4 point) from 2.65 percent.

""Mortgage rates fell following the Federal Reserve announcement that it will maintain its bond buying stimulus,"" said Frank Nothaft, VP and chief economist for Freddie Mac. ""These low rates should somewhat offset the house price gains seen the last number of months and keep housing affordability elevated.""

Declines were just as drastic in ""Bankrate.com's"":http://www.bankrate.com/ weekly national survey. The site reported a drop of nearly 20 basis points for the 30-year fixed, which ended the week at 4.47 percent, while the 15-year fixed declined 17 basis points to 3.53 percent.

The 5/1 ARM was down to 3.41 percent, meanwhile.

""The Federal Reserve's decision not to begin tapering their stimulus will give mortgage shoppers a reprieve from rising rates, but only until the tapering starts,"" Bankrate said in its weekly release. ""As for when that will be, much depends on the outcome of the government budget and debt ceiling debates.""

If those matters are resolved ""smoothly and without incident,"" analysts at the site expect a taper could start in late October.

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