Mortgage rates sink even further to 4.44%

Brokers say some savvy folks refinancing for lower than that

August 12, 2010 

WASHINGTON — Growing pessimism over the weak economic recovery pushed mortgage rates to the lowest level in decades for the seventh time in eight weeks.

The average rate on a 30-year fixed mortgage hit 4.44 percent this week, mortgage buyer Freddie Mac said Thursday. And some brokers say homeowners looking to refinance have managed to do so for as low as 4 percent.

Still, cheap rates have done little to boost the struggling housing market. Instead, they are highlighting investors' fears that the rebound is stalling and the country could be slipping back into a recession.

Investors are shifting their money away from stocks and into safer Treasury bonds. That is sending Treasury yields lower. Mortgage rates track those yields.

The Federal Reserve is pushing those yields down even further. The central bank said Tuesday that it would buy Treasurys to help aid the recovery, using the proceeds from debt and mortgage-backed securities it bought from Fannie Mae and Freddie Mac.

That move alone is unlikely to push average rates down to 4 percent, said Bob Walters, chief economist at Quicken Loans. But average rates that low are a possibility if the economic outlook worsens further.

"The silver lining to a bad economy is that interest rates fall," Walters said. "If you can lower your debt burden by refinancing, that's great."

Low rates have failed to revive a struggling housing market. Slow job growth, a 9.5 percent unemployment rate and tight credit standards have kept people from buying. Applications to refinance have grown but remain well short of a massive boom.

Overall home loan applications rose 0.6 percent last week from a week earlier, the Mortgage Bankers Association said Wednesday.

For those homeowners with solid finances, the opportunity to refinance at less than 4 percent is persuading some to consider 15-year fixed loans. Those average rates dropped to 3.92 percent, down from 3.95 percent last week and the lowest in decades.

More homeowners are choosing that option because it allows them to save money in the long run, though it costs more in monthly payments. Freddie Mac says nearly a third of borrowers refinancing 30-year loans in the April-to-June picked 15-year or 20-year terms.

Still, savvy consumers can find 30-year fixed rates at or near 4 percent if they are willing to pay a little more upfront.

Chik Quintans, assistant sales manager with Atlas Mortgage in Seattle, said he was able to get two clients into mortgages with a 4 percent interest rate and a fee of 1 percent of the total mortgage amount Wednesday. But rates have inched up since then.

"Every day's different," Quintans said. "Sometimes people have to ruminate, and then the opportunity's gone."

Refinancing could pick up significantly if rates fall further.

An average rate of less than 4.375 percent could be enough of a drop that many people who refinanced last year could shave a half of a percentage point off their mortgage rates, said Scott Buchta, chief mortgage strategist with Braver Stern Securities.

Lenders could find themselves in a bind if traffic picks up, Buchta said. Many have laid off thousands of workers over the past three years and don't have enough staff to handle a crush of applications.

Mortgage rates often fluctuate significantly, even within a given day. To calculate the national average, Freddie Mac collects mortgage rates Monday through Wednesday of each week from about 125 banks, thrifts and credit unions around the country in a voluntary survey.

Rate quotes from parts of the country with more lending activity — such as the West and Northeast — are given more weight in creating the average.

Rates on five-year adjustable-rate mortgages averaged 3.56 percent, down from 3.63 percent a week earlier. Rates on one-year adjustable-rate mortgages fell to an average of 3.53 percent from 3.55 percent.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac's survey averaged 0.7 a point for all loans except for 15-year mortgages, which averaged 0.6 of a point.

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