Mortgage guarantor Freddie Mac, reported that “the average rate for a 30-year, fixed rate loan fell to 4.09% this week, its lowest level in 60 years.” That’s down from last week’s low of 4.12%. “The average rate for a 15-year fixed mortgage dropped from 3.33% last week to 3.30% this week. The record- breaking trend is reported in a September 15, CNNMoney.com article.
The trend sparked an increase of 6.3% in mortgage applications; however 77% of loan applications were for refinancing existing mortgages. Stats indicate that only 23% of heightened mortgage loan activity involved initial loans for purchasing homes.
According to the Federal Housing Finance Agency, 8 million homeowners with Fannie Mae or Freddie Mac related home loans currently carry interest rates of 6% or higher. If such homeowners refinanced to today’s “30-year average fixed rate; it is estimated that on a typical $200, 000.00 mortgage, a homeowner could realize a savings of $1,715 per year in interest.” The 15-year mortgage, a popular choice for existing homeowners, would yield even higher immediate savings.
It is noteworthy that qualification requirements for the lowest interest rates are demanding. Initial purchases often require large down payments and pristine credit. Refinancing for best rates requires a strong record of on-time payment performance and perceived stability.
In August, the Fed promised to keep interest rates low through at least mid-2013. Are prospective buyers using the “mid-2013 promise” as a reason to wait? Are prospective buyers and existing homeowners in your area aware just how low rates are? What trends are you seeing among qualified prospective buyers and existing homeowners?
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