Get Off That Fence!

"30-Year Mortgage Rate Hits Its Lowest Level in 4 Years"

The average interest on a 30-year, fixed-rate mortgage dropped to 5.47 percent this week -- its lowest point in more than four years, according to a Freddie Mac survey.

But many lenders say the rates have dropped even further since Freddie Mac polled lenders on Monday, Tuesday and Wednesday.

The mortgage research firm HSH Associates said yesterday's average rate was 5.33 percent. The trade publication Inside Mortgage Finance said it was 5.09 percent based on its polling of lenders.

"I locked a person in [yesterday] at 4 7/8 percent on a 30-year fixed loan," said Steve Calem, vice president of American Bank in Rockville. "The rates are still volatile in any given day, but they're bouncing up and down from 5.25 to 5.5 percent."

Many firms regularly track interest rates and come up with slightly different numbers because they survey different sets of lenders at different times of the day or week.

The dip reflected in this week's surveys reflect in part the lingering effects of the Federal Reserve's announcement late last month that it would buy a sizeable chunk of mortgage-backed securities.

Immediately after the initiative was unveiled, interest rates dropped well below the 6 percent mark, fueling a wave of mortgage applications, mostly from people looking to refinance. But it was unclear if the rates would stay down as long as they have given the wild swings of the last few months.

Freddie Mac said this week's 5.47 percent average is down from 5.53 percent last week and 6.11 percent last year at this time. The survey captures rates on loans that meet the guidelines of Fannie Mae and Freddie Mac, which together accounted for 57 percent of all mortgages made in the third quarter, according to Inside Mortgage Finance.

Frank E. Nothaft, Freddie Mac's chief economist, said the recession and recently released high unemployment numbers also played a role in driving down rates.

With the economy in turmoil, investors are clamoring for government bonds, a traditional safe haven during market turbulence. When demand for long-term bonds is high, the yield falls on long-term investments. That ultimately translates into lower rates on mortgages, which are long-term investments.

"Bond yields fell slightly this week, allowing fixed-rate mortgage rates room to ease back a little further," Nothaft said.

No matter what the rates are, borrowers should keep in mind that they probably will not qualify for the lowest offers if they lack stellar credit. Those who want to refinance also must have equity in their homes, a challenge for many because home prices are down in most parts of the country.

Washington Post staff writer Renae Merle contributed to this report.


Article taken from http://www.washingtonpost.com/wp-dyn/content/article/2008/12/11/AR2008121103557.html?wpisrc=newsletter