Homeowners across the nation, and here in Siskiyou County too, are in line to benefit from the current record breaking low mortgage rates, which are hovering right around the 5% mark.
The dip in rates come in response to a statement released in late November by the US Federal Reserve, which announced that they would be purchasing $500 billion in mortgage-backed securities in an attempt to unfreeze credit markets and revive the failing economy.
Immediately following this announcement, interest rates took a dive, said Jacob Barr, owner of Ridgecrest Mortgage in Mount Shasta. On Dec. 17, the Feds cut short term interest rates, and last Monday they began making purchases.
“Between now and June, [the Feds] will be spending $500 billion... that’s $4 billion per business day,” Barr said. “That’s a lot of ammunition.”
Mirroring what is happening in our country’s economy, England’s mortgage rates were cut to 1.2% last week – the lowest they have ever been since the creation of the Bank of England in 1694. “That’s an indicator of how dire the situation is,” Barr said.
Here at home, a week before President Elect Barack Obama takes over the White House, homeowners are scrambling to take advantage of landmark low interest rates.
Some of the nation’s largest mortgage lenders are offering fixed rates below 5%, including JP Morgan Chase & Co. and Wells Fargo Bank, according to the Bloomberg Financial website. All this comes after the lending industry lost 70% of its workforce in the past 12 months.
“Now is a good time to conduct a sound mathematical analysis of your current mortgage to determine whether or not a refinance would be beneficial,” said Barr. “This is the first part of the US bailout that helps us as individuals... helping to lower interest rates is something tangible that will help homeowners.”
When considering a refinance, many times people focus on their payments, “but they need to find out how much they’ll be saving in the long run... how long it will take for the interest savings to add up to the fees they’ll pay... [Refinances] should only be done if they’re beneficial,” Barr said.
Debbie Nelle of A to Z Home Loans in Mount Shasta said that all lenders are requiring applications to be submitted in full before homeowners can lock in rates. “The rates change daily, so my best advice would be to get your paperwork in... so you’re ready to be locked in when the rate is where you want it.”
Although credit standards have been considerably tightened since the dip in the economy, and fewer Americans will qualify for loans, applications for refinance can be done for a relatively low amount of money – and it may be worth the investment. “There are savings to be had,” said Barr.
Whether or not the billions the Feds pump into lending agencies will be enough to prop up the housing market, no one is yet certain, although hopes are high. "We are a prosperous nation with immense resources and a wide range of tools at our disposal... We can solve this crisis and we will," President Bush said as 2008 came to a close. On Dec. 23, US Commerce Secretary Carlos Gutierrez said in a press release, “The US has the most diverse and resilient economy in the world. I am confident we will recover from this difficult situation and return to the path of economic growth.”
Mount Shasta, Calif. —
