Mortgage Rates Ended 5-Week Descent

Mortgage rates finally ended their five-week descent following the Fed's decision to cut its federal funds rate by half of a percentage point to 3%, as announced on wednesday. For the sake of record-keeping, we may note that, in eight days, the Fed has cut rates by 1.25 percentage points, the fastest pace in 20 years.

After the Fed's move, market rates for 30-year notes and 10-year bonds rose steeply. By contrast, rates fell sharply for 3-month and 6-month bills. Fixed-interest mortgage rates are set by markets based on long-term money rates, and usually not by short-term rates. If bond investors fear that the Fed is letting inflation to grow out of control, then long-term rates could rise, as they did on Wednesday after the rate-cut decision.

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage rose to 5.68% from last week's average of 5.48%. A year ago, 30-year mortgages stood at 6.34%. The rate is still hovering well below its historical average.

Rates on 15-year fixed-rate mortgages, a popular choice for refinancing, rose to 5.17%, from 4.95% last week. Rates on 15-year mortgages were at 6.06% a year ago.

The 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) also moved up to 5.32% from last week's average of 5.13%. The five-year ARMs averaged 6.04% at this time last year.

One-year Treasury-indexed ARMs averaged 5.05%, up from 4.99% last week. At this time a year ago, the 1-year ARM averaged 5.54%

Fixed Mortgage Rates Hit Four-Year Lows

Mortgage rates continued trending down for the fourth consecutive week across loan products. This week mortgage rates fell sharply with long term rates dropping to the lowest level in four years.

The main ingredient for this sharp fall has been the cut in the target federal funds rate by three-quarters of a percentage point on Tuesday. It is the largest cut since October 1984, and also the first time in more than six years that the Fed took such action outside of a scheduled Federal Open Market Committee meeting. The last time the Fed decided to ease the target federal funds rate in an unscheduled meeting was immediately after Sept. 11, 2001.

The recent movement in rates has inspired more homeowners to refinance in recent weeks. A 30-year fixed rate below 6% is indeed a bargain!

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage went down to 5.48% from last week's average of 5.69%. A year ago, 30-year mortgages stood at 6.25%. The rate hasn't been lower since late March 2004, when it averaged 5.40%.

Rates on 15-year fixed-rate mortgages, a popular choice for refinancing, slid to 4.95%, from 5.21% last week. Rates on 15-year mortgages were at 5.98% a year ago.

The 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) also dropped to 5.13% from last week's average of 5.40%. The five-year ARMs averaged 6.00% at this time last year.

Fidelity Magellan Fund Opens Again

Fidelity Investments announced today it would reopen the legendary Fidelity Magellan Fund (FMAGX) to new investors for the first time in more than a decade. Performance at the roughly $45 billion fund, which had come under fire for lagging its benchmark, has turned around under manager Harry Lange, who took over in October 2005. Fidelity Magellan Fund has gained 11% over the past 12 months, easily outpacing its benchmark as a result of growth-stock picks that paid off last year.

"If we're able to achieve a better balance of cash flows in the fund going forward, I'll regularly have the cash on hand to capitalize on attractive investment opportunities as I find them," Henry Lange said in a statement.

The fund started on May 2nd, 1963. Peter Lynch became legendary as the Magellan fund manager. He achieved a 29% average annual return with the fund over a period of approximately 13 years. He retired in 1990.

The fund has a low expense ratio of 0.54%.

Sharp Drop in Mortgage Rate

This week mortgage rates fell sharply with long term rates dropping to the lowest level in more than two years. The 30-year fixed-rate mortgage fell to its lowest level since September 20.

Increased worries about a recession originating from credit crunch and a severe slump in housing market have also acted behind the fall of the mortgage rate. At the same time, the nation's unemployment rate jumped to a two-year high of 5%. The National Association of Realtors also indicated a drop in its pending-home sales index for November, signaling a possible slowdown in December sales.

The recent movement in rates has inspired more homeowners to refinance in recent weeks. A 30-year fixed rate below 6% is indeed a bargain!

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage went down to 5.87% from last week's average of 6.07%. The rate was 6.48% one year back. A year ago, 30-year mortgages stood at 6.21%.

Rates on 15-year fixed-rate mortgages, a popular choice for refinancing, slid to 5.43%, from 5.68% last week. Rates on 15-year mortgages were at 5.96% a year ago.

The 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) also dropped to 5.63% from last week's average of 5.78%. One-year Treasury-indexed ARMs averaged 5.37%, down from 5.47% of last week. The five-year ARMs averaged 6.08% and one-year ARMs were at 5.44% at this time last year.