Posted on Fri, Dec. 27, 2002
Mortgages at 37-year low
By Steve Johnson
Mercury News
URL:http://www.bayarea.com/mld/bayarea/business/4822104.htm
The average interest rate for a 30-year fixed mortgage plunged this week to the lowest level in 37 years, which is likely to mean lower housing costs for many consumers.
The rate of 5.93 percent is the lowest since 1965, according to the Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac.
Although that's only slightly better than the 5.94 percent rate recorded in mid-November, it continues a streak of falling rates that has left homeowners rejoicing and mortgage brokers scrambling for their business.
``It's a phenomenal time to be a consumer in the market shopping for a mortgage,'' said Frank Nothaft, Freddie Mac's chief economist, who attributed the drop to this month's reported rise in unemployment and lackluster holiday retail sales.
The latest rate is substantially better than in previous years.
In October 1981, for example, it stood at 18.63 percent. That meant someone borrowing $300,000 would have paid more than $4,600 a month. By comparison, the same-sized mortgage now would be less than $1,800 a month.
Rates on other types of mortgages are even cheaper. Fifteen-year fixed-rate mortgages fell this week to 5.32 percent while one-year adjustable-rate mortgages dropped to 4.01 percent.
It's unclear how many people will be prompted to refinance their homes because of the drop. Since mortgage rates have been relatively low for months, some brokers say most homeowners interested in refinancing already have done so. But others say many consumers who refinanced two or three years ago will be encouraged to do so again, now that rates have fallen to the latest levels.
Alex Rojas, 38, of San Jose figures to save hundreds of dollars by refinancing his mortgage, which is currently over 7 percent. He and his wife already have met with one lender. But he said he'd have no problem finding another, considering how aggressively brokers are touting their rates these days.
``I'd be shocked if I didn't get a call from a mortgage company at least once a week,'' Rojas said.
He's not the only one getting calls, said Joe Adamson, who co-owns Mortgage Magic in San Jose. ``There are a lot of brokers utilizing telemarketing services to call homeowners to offer them their services,'' he said.
Others are working hard to keep the customers they already have. First Nationwide Mortgage, for example, is offering to let its customers modify their existing mortgages for a flat $500 fee, which it claims is cheaper and less complicated than its traditional refinancing process.
Forrest Cambell, president of Monterey Bay Mortgage in Capitola, said he's concerned because so many brokers offering refinancing these days are relatively new to the business.
``Consumers should be really careful,'' he said. ``They really need to rely on a professional who can guide them through the process and explain the forms.''
But Jerry McClain, president of the Silicon Valley chapter of the California Association of Mortgage Brokers, said the increasing amount of online information about mortgages has educated many people to the point where they now come to brokers brimming with facts.
``The consumer is a lot more sophisticated,'' he said. ``They're sort of telling you, `I saw this, I heard this, I read this.' -- which is good. The more aware of what's going on, I think, the less likely they are to be driven down the wrong path.'' |
