After jumping to a seven-month high, rates on long-term mortgage rates dropped back down in the latest week. According to mortgage giant Freddie Mac, during the week ended June 18, 2009, the average rate dropped to 5.38 percent, excluding points, from 5.59 percent the week before, and down from 6.42 percent one year ago.

Why did rates fall? Freddie Mac credited slowed inflation growth for the declining mortgage rates. Many on Wall Street believed inflation would rise by more than it did in May. Most dramatically, producer prices dropped by 5.0 percent from the previous year, the biggest decrease since 1950.

Based on all the recent reports, Frank Nothaft, Freddie Mac vice president and chief economist commented, “It’s still too early to tell whether the decline in housing market activity has hit bottom yet.”
Meanwhile, in an interview on CNBC today, Forbes CEO Steve Forbes blamed the Federal Reserve for the current housing market troubles. As quoted on the dailyfinance.com blog, Forbes said he thinks the Fed “should announce first they’re not going to buy any more Treasury securities. Cash in the banking system is not the problem, the problem is that parts of the credit economy are still not working.” What the Fed should do, he added, is to aggressively buy up mortgage-backed securities as well as packages of credit car, car, and other consumer credit loans.

Forbes also decried the Obama administration’s decision to give the Fed greater regulatory powers over the country’s financial institutions.

“In terms of regulation,” he said, “it is a bit ironic they’re still going to put new powers in the Federal Reserve, which is an agency that, one, didn’t exercise proper oversight over the banking system that it had already under its purview and [two,] its lousy monetary policy in 2003 and 2004, when it printed all this excess money, made the bubble possible.”
Amen.