Low Mortgage Rates Opens Door Of Opportunity

February 5, 2008

The window of opportunity for home buyers has opened wider with mortgage interest rates dropping to the lowest level in four years. In early February, the average rate for a 30-year fixed-rate mortgage is only about 5.6 percent, but is beginning to edge up a bit. Last year at this time the rate for the same loan was 6.25 percent. The 15-year fixed-rate loan, particularly popular with homeowners wanting to refinance their existing mortgage, is now 5.04 percent.

"Recent economic news has confirmed the weak condition of the housing market," said Frank Nothaft, chief economist for Freddie Mac, a government-sponsored enterprise that purchases mortgages. "Housing construction starts has fallen to its slowest pace since May, 1991. Last year, as a whole, housing starts dropped nearly 25 percent from the previous year’s level. This is the largest annual decline since 1980. New building permits also fell to the lowest level since March, 1993," he said.

When the Federal Reserve recently cut the federal funds rate dramatically, including the January 30 cut of another half a percentage point, the actions were extraordinary in both the magnitude and timing, Nothaft noted. The two cuts in January were the largest since October, 1984.

source: Jim Woodard

Posted in Lending, Real Estate