Mortgage Rates Sink To Record Lows
HOME LOANS, TIPS FOR BUYERS
April 7th, 2009
A recent article in AP noted that mortgage rates have fallen to the lowest level ever for the second consecutive week. The average rate is 4.78% this week, down from 4.85% the week before. This is the lowest it has been since Freddie Mac started keeping track 38 years ago. Today’s rates are more than 1% lower than a year ago.
The rate drop has caused a surge in refinance activity. Nearly 80% of the loan applications are for refinances, not purchases. This could result in more homeowners keeping their homes instead of losing them through foreclosure. The Mortgage Bankers Association said the mortgage application index increased 30% from a week earlier.
One reason cited for lower rates is a pledge by the Federal Reserve to buy $1.2 trillion in mortgage-backed securities and $300 billion in long-term government debt. Borrowers need to understand though that lending standards have tightened significantly meaning these rates will only be available to those with solid credit profiles.
CNN Money noted that the historic average for a 30-year mortgage is 8%. For example, a loan of $170,300 (the average cost of a home) at 5% would result in a monthly payment of $915. At the historic average of 8%, that payment would be $1,250. The $335 monthly savings translates to $4,000/year. That’s significant.
Locally, the word about low mortgage rates must be out there in Redding/Shasta County. I’ve noticed many properties receiving multiple offers and in some cases bidding wars result in a final sales price above the listed price. This could be the first sign the market has bottomed. Some areas of the country have reported slight increases in average home prices. Yet another sign of light at the end of the tunnel.
Buyers still waiting on the sidelines may see further home price declines however they may lose any benefit of waiting if mortgage rates spike. It’s a gamble either way but tax credits offered for a limited time by state and federal government should buffer any downside risks. No one can predict the bottom until the prices are reported to be heading back up. By then, it’s too late if you’re trying to time the market!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
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