Record-low mortgage rates may spur home sales, but some say the dip isn’t enough to make a significant impact. And ccould benefit with refinancing.
Mortgage rates fell to the lowest level on record this week, adding an incentive for home buyers as sales slumped in May, and making a refinance more attractive.
The average rate for a 30-year fixed loan declined to 4.69 percent, from 4.75 percent last week.
It’s the lowest since Freddie Mac began tracking rates in 1971. The previous record of 4.71 percent was set in December.
In the Miami market, the 30-year fixed loan rate declined to 4.72 this week, down from 4.82
last week. The rate for a 15-year fixed loan dropped from 4.19 last week to 4.04 this week, said Mark Kasim, a manager for financial statistics hub Bankrate. While some real estate brokers are reporting increased sales as buyers take advantage of the low interest rates, others say the dip isn’t enough to make a significant difference.
“I think the government’s incentive has done more than interest rates.” said Hazel Goldman, a Miami-Dade Realtor and public relations chair of the Master Brokers Forum. Goldman said peoples’ decisions whether to purchase a home are usually tied to whether they have good credit, not small fluctuations in the mortgage rate.
“A quarter to a half of a point of interest reduction doesn’t move you down the pyramid,” she said.
But Carlos Garcia, a Realtor for the Keyes Company in South Miami-Dade, said he’s seen a boost in homebuyers looking for homes priced below $250,000. The low interest rate often makes home payments cheaper than the cost of renting, he said. Jack McCabe, of McCabe Research and Consulting in Deerfield Beach, said he’s not sure the interest rate decrease will be enough to spur sales.
The Mortgage Bankers Association’s index of mortgage applications fell 5.9 percent in the week ending June 18, McCabe noted.
Almost no one expects falling rates to energize the economy. Sales of new homes collapsed in May after an enticing tax credit expired.
“As long as prospective homebuyers are still concerned about their jobs and financial well-being, many will be reluctant to take the plunge, even though affordability has never been better,” said Greg McBride, senior financial analyst with Bankrate.com.
Interest rates have fallen the past couple of months as investors worried over the European debt crisis and an unstable stock market put money instead into U.S. mortgage backed securities, Tennell said.
Rates on 15-year, fixed-rate mortgages fell to an average of 4.13 percent, the lowest on records dating to September 1991 and down from 4.2 percent a week earlier.
Rates on five-year, adjustable-rate mortgages averaged 3.84 percent, down from 3.89 percent a week earlier. That was also the lowest on Freddie Mac’s records, which date to January 2005.
Given the costs, some mortgage experts say a refinancing can be worthwhile if you can shave at least 0.75 percentage point from an existing rate. Others suggest waiting until you can lower your rate by at least a point.
For Florida homeowners, many of whom bought during the real estate boom, and now owe more on their loan than their home is worth, refinancing may not be an option under traditional means.
The federal Home Affordable Refinance Program allows some underwater borrowers to refinance, but caps the extent of the negative equity allowed, limiting it to people who owe up to 25 percent more on their loan than the market value of their home. The program is available through June 2011.
Also, homeowners must consider closing costs that accompany refinancing. Appraisal fees, title insurance and state documentary stamp taxes can total about 2 percent of the amount of the loan.
Refinancing activity now amounts to less than half the level of early 2009, when long-term rates hovered around 5 percent, according to the Mortgage Bankers Association.
Besides, many people who want to refinance — and are able to — have already done it, said Michael Fratantoni, vice president of research and economics at the trade group. And refinancing costs can total several thousand dollars.
By MIAMI HERALD
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