The average quote for a 30-year fixed rate mortgage on Zillow's mortgage marketplace last week was 4.14 percent. The average rate quoted for a 15-year loan was 3.6 percent. And for those willing to take a flier on a 5/1 adjustable rate mortgage (ARM), the average quote was 2.96 percent. Imagine getting a loan fixed for 5 years at under 3 percent. It's hard to believe.
What's even harder to believe is that the
The goal of the program is to lower long-term interest rates.
The economic reasoning behind the purchases is that if long-term interest rates go down, economic activity will pick up, jobs will be created and the economic recovery will begin in earnest. And when that happens, those lower rates will spur the housing market to recover.
Will it work?
It might, if everyone acts on those super-low interest rates. But will businesses hire more workers and make additional investments simply because the cost of borrowing drops another one-half of a percent? Is there a really big difference between borrowing money at 4 percent versus 3.5 percent? Lower interest rates seem less likely to spur a business to act than landing a new client or an additional piece of business.
When it comes to mortgage refinancing, the same principal applies. There is a finite number of homeowners who can refinance to take advantage of the super-low interest rates, because most don't have enough equity in their homes, or their credit scores are shot, or they don't have enough cash on hand to pay the closing costs or fees. Many of those who do have the cash, credit and equity necessary have already refinanced at record-low interest rates. Some have already refinanced a couple of times, as interest rates dropped.
Is it worthwhile to refinance again if you'll only save
There's also some question about whether lower interest rates will spur home buyers to jump off the fence and make an offer. Mortgage interest rates are nearly at 4 percent for a 30-year fixed-rate loan. But buying a home is a bigger decision than simply looking at how low interest rates are. You also have to have great credit and plenty of cash for closing costs and reserves. Many home buyers don't have all those ducks in a row.
You also have to have a reason for moving: You desire a bigger house or a better school district; you want to take a new job; or, perhaps you're ready to downsize and retire.
Will lowering interest rates overcome all of these other hurdles home buyers are facing? It's tough to know.
One thing is for sure: Mortgage interest rates have never been this low. And if you do qualify to refinance, and your current interest rate is over 5 percent on your 30-year or 15-year loan, you should run the numbers and figure out whether it makes sense for you to refinance your property.
- How Much Should You Pay to Refinance?
- Interest Rates Drop Again But Will Housing Market Perk Up?
- On Sale: Retirement Havens
- Appraisal Problems Kill Opportunity For Lower Mortgage Rate
- Our Big Fat Foreclosure Mess
- What to Expect When You're Closing on Your Mortgage Loan
- Shopping for a Home When There's Too Much to Buy
- Finding Second Home Bargains
- America's 10 Slowest Appreciating Housing Markets
- The Costs of Retiring with a Mortgage
- Prepaying a Mortgage: When Does It Maske Sense
- Shorter-Term Mortgages Make Sense for Some
- Thinking About Refinancing? Get Moving
- 10 Historic Places to Retire
- Do You Live in a High-Debt City?
- How to Get a Government-Backed, Zero-Down-Payment Mortgage
- Housing Demand Evaporates As Stimulus Ends
- Home Prices Likely to Slide After Sales Plummet
- 9 Reasons to Choose a New Home Over a Resale
- What will happen to the housing market?
- Pay Off Investment Property or Pay Off Primary Residence?
- 9 Smart Ways to Come Up with Down-Payment Cash
- More Federal Help for Struggling Homeowners
- Home Builders Not Driving Economic Recovery
- Packing for a Move Is an Art Unto Itself
- An Expert Looks at the Future Of Real Estate
- How Financial Reform Affects Home Buyers
- 10 Best Places to Reinvent Your Life in Retirement
- Housing Market Takes Another Step Backwards
- When Buying Distressed Property Know All Liabilities That Come With It
- 3 Ways to Invest in the Real Estate Rally
- Will the REITs Rally Continue?
- Home Prices Improve But May Soon Begin Sliding
- Home Sales Rebound From Record-Low Levels
- Downward Pressure on Home Prices Mounts
- Dirt-Cheap Mortgage Rates: Here for How Long?
- 6 Reasons the Housing Market Hasn't Recovered
- Distressed Home Sales to Sandbag Housing Revival
- Home Sales Poised to Drop in Coming Months
- Did You Miss Out on 2010 Home Buyer Tax Credits? It May Not Matter
- New Home Sales Plummet to Record Low
- The Housing Market's Unexpected Drop
- Builders Break Ground on Fewer Homes
- Home Builders Grow Gloomy As Tax Credit Ends
- Housing Market Predictions Change with Lousy Housing Sales Numbers
- Homebuyer Tax Credit Deadline May Be Extended
- Home Repossessions Hit New Record High
- Applications Point to Slow Summer Housing Season
- Bank of America Program to Forgive Loan Principal for Some Borrowers
- Home Prices Have Further to Fall: Here's Why
- 10 Cities for Retirement Property Steals
- What Home Sales Jump Means for Economic Recovery
- Why Housing is Headed for Second-Half Headaches
- Mortgage Rates Are at Historic Low, but LIBOR Is Rising
- Unloading a Timeshare No Simple Task
- Loan Modification Nightmare Continues As More Americans Pay Their Mortgage Late
- How to Identify Ideal Vacation Rental Property
- 7 Ways to Avoid a Crummy Real Estate Agent
- Rules To Improve Credit History and Raise Credit Score
- Confused About New World of Mortgage Finance? You're Not Alone
- Underwater on Mortgage But Too Much Skin in Game to Walk Away
- 7 Reasons to Downsize in Retirement
- Investment Property Costs: Add These Real Estate Expenses to Your Budget
- Don't Make These Real Estate Investing Mistakes
- Don't Make These Real Estate Investing Mistakes (Part 2)
- 12 Hidden Costs of Homeownership
- Don't Sign Over Title Until Your Name's Off the Mortgage
- Quitclaim Deed Not a Way to Get Mortgage Modification
- Nine Ways to Make Your Home More Appealing to Buyers
- Loan Modification Angst
- Obama Housing Rescue Tackles Unemployment & Underwater Loans
- How Much House Can I Afford? Calculating Home Affordability
- Home Sales Flat Before Spring Buying Season
- More Homeowners Pursue Remodeling Projects
- America's Most Underwater Housing Markets
- Energy-Efficient Updates Help Homeowners Save Cash
- Home Buying Checklist: What Savvy Home Buyers Need to Know
- Social Networking for Realtors Mortgage Lenders Buyers and Sellers
- Home Affordable Program Failing Homeowners
- Rate of Home Price Declines Slows, But More Drops May Be Ahead
- The Future of Home-Price Appreciation
- What Tanking Home Sales Mean for Economic Recovery
- Home Foreclosures Approach Peak Range
Real Estate - Interest Rates Drop Again But Will Housing Market Perk Up?
(c) 2010 Ilyce Glink