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Mortgage interest rates are falling again after rising to hit almost 6% last week. Rates for mortgage loans are now in a range between 5.375% and 5.75%. Currently market pressures show this downward trend continuing in the short term. Money is moving out of the stock market, and foreign countries such as Russia have not only stopped saying unflattering things about the US dollar, but have actually been affirming its importance as the world reserve currency. This helps strengthen the dollar and results in money also flowing out of commodities, with some of it going into bonds.

The Fed has the balancing act to maintain between working to promote full employment and working to keep inflation low. The financial publications, such as CNBC, report that the Fed may extend their purchases of U.S. Treasuries when they meet next week. This will help to stimulate the economy with added liquidity, but due to investors inflation concerns an overly aggressive expansion of buying is not likely.

The steep rise in U.S. government bond yields resulted in the latest spike in mortgage rates. Rising interest rates while still in the depths of a severe recession would slow down or stall economic recovery efforts. Fortunately other measures of credit market unease, like the spread between U.S. government debt and recent corporate debt issues, have eased. This helps the Fed a lot with its delicate balancing act. They do not have to feel compelled to risk furthering inflation fears buy buying U.S. Treasuries too aggressively.

Given current and historical trends, it is likely that we saw an historic low in mortgage interest rates last month, when they were as low as 4.5% to 4.625%. Since I do not have a crystal ball, and no one can pick market tops or bottoms with absolute accuracy, I'd advise those looking to purchase or refinance a home to lock into any rate near 5%. If we see anything around 5.125% to 5.375% I'd say lock and load! To view a four page historical chart of mortgage interest rates from April 1971 through April 2009 (the last month for which data was available at Freddie Mac), click here.

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