Blame Greece's debt crisis for contributing to the recent drop in your stock portfolio, but give it credit for something that could benefit consumers: lower mortgage rates.Last week, rates on fixed-rate mortgages fell to their lowest level this year, while rates on adjustable-rate loans dipped to a point not seen for years, according to a weekly survey by mortgage giant Freddie Mac.
The average 30-year fixed-rate mortgage slipped to 4.93 percent last week, down from 5 percent the week before and down to the lowest level since early December."Rates are certainly very low. It's a really great time now to shop for a mortgage for a home purchase or to refinance," says Frank Nothaft, Freddie Mac's chief economist.Early this year, rates weren't expected to be headed lower. Then came the financial crisis in Greece. Worries that this Greek tragedy could spread across Europe prompted investors to flee to U.S. Treasuries for safety, and the demand pushed down long-term interest rates that influence the 30-year fixed rate mortgage,
Nothaft says. Inflation, too, is in check, so the Federal Reserve is unlikely to boost short-term rates that affect adjustable rate mortgages anytime soon, he says.As of last week, the 15-year fixed-rate mortgage fell slightly to 4.3 percent, its lowest level since in more than six months, Freddie Mac reports.The one-year adjustable-rate mortgage dipped to an average of 4.02 percent. Not since November 2004 has the rate been lower. And the five-year adjustable-rate mortgage, where rates are fixed for five years and then adjusted annually, averaged 3.95 percent, the lowest since Freddie Mac started tracking the loan in 2005.
"These very low levels may prove to be fleeting. As soon as the nervousness subsides, we could see rates move up a little bit," says Greg McBride, senior financial analyst with Bankrate.com.But McBride doesn't expect that to happen for a while."These global uncertainties will keep the Federal Reserve on the sidelines even longer so mortgage rates are going to stay lower longer than we had been expecting just a couple of weeks ago," he says.He predicts the popular 30-year fixed-rate mortgage will hover around 5 percent through mid-summer. If the economy continues toward recovery, the rate could run 5.5 percent to 6 percent by year-end, he says.Those in line to benefit are the home buyers who rushed to get a house under contract last month so they could claim the federal homebuyer credit and now have until the end of next month to close the deal, McBride says.
Homeowners with adjustable-rate mortgages that will reset in two or three years should consider refinancing now, McBride says."There is no better time than now to trade away the uncertainty of what might happen in exchange for the predictability of these fixed rates that are still near record lows," he says.But many consumers may not be able to take advantage of these rates as lending standards have tightened, making it difficult to qualify.The rules have changed since the subprime mortgage fiasco, during which homebuyers didn't even have to verify income to get a loan. Underwriting standards today are stricter, and lenders require far more documentation.Exacerbating the problem: A lack of house sales in certain neighborhoods can make it difficult to get an accurate appraisal or one that meets the borrower's higher expectations, says Neil Sweren, vice president of Southern Trust Mortgage in Owings Mills.
Sweren says he gets lots of queries about mortgages and refinancing from consumers. About half can't be helped because they can't verify they have enough income — a frequent problem for the self-employed — or they aren't able to get the loan amount they need largely because their house is worth a lot less than they owe on their mortgage, he says.There are loan programs for those with credit scores starting at 620 — the low side of a FICO score, Sweren says. But consumers should be prepared to document all their income and assets, Sweren says.
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