Interest rates

There were sighs of relief on both Wall Street and Main Street when Federal Reserve Ben Bernanke told Congress this week that he expects interest rates to stay low for an extended period. The news is especially welcome in the housing market, where low rates are key to a sustained recovery.

In two separate hearings, Bernanke signaled the Fed’s intentions to keep rates low. In testimony before the Senate Banking Committee today, he said the weak economy justified the low interest rates. He made similar comments yesterday in testimony to the House Financial Services Committee.

Earlier this month, the Fed raised the rate it charges banks for short-term loans. Even though that increase had been expected, there were concerns that the central bank might increase other rates as well.

“Even though nothing he said was particularly new, it was just enough to calm the ruffled feathers that were out there,” Jim McDonald, chief investment strategist at Northern Trust in Chicago told the Associated Press.

Freddie Mac announced today that rates on 30-year mortgages have fallen to 4.83 percent – much lower than the 6.04 percent rates seen one year ago. Freddie Mac’s chief economist Frank Nothaft reports that attractive 3Q rates have led to approximately $1.1 trillion in refinancing activity, saving borrowers about $10 billion in monthly payments over the first 12 months of their new loans.

Will these eye-catching rates last long? Probably not. Attempting to lower mortgage rates and loosen credit, the Federal Reserve has pumped $1.25 trillion into mortgage-backed securities. It is likely that this wide scale effort will end early next year, resulting in another round of raised rates.

For questions regarding mortgages and home financing, contact Ascent Financial Services. Also visit  msnbc.com to read more details about Freddie Mac’s report.