Mortgage rates barely moved in Bankrate's weekly survey.
The benchmark 30-year, fixed-rate mortgage edged up 1 basis point, to 5.53 percent, according to the Bankrate.com's national survey of large lenders. A basis point is one-hundredth of 1 percentage point.
The mortgages in this week's survey had an average total of 0.32 discount and origination points. One year ago, the mortgage index was 6.6 percent; four weeks ago, it was 5.56 percent.
The benchmark 15-year, fixed-rate mortgage slipped 1 basis point, to 4.83 percent. The benchmark 5/1 adjustable-rate mortgage jumped 9 basis points, to 4.95 percent.
Who gets the credit?
Home buying activity is picking up in many U.S. markets, sparking debate about whether a federal tax break deserves kudos for the modest turnaround.
Last February's economic stimulus package included a tax credit for first-time homebuyers who purchase a primary residence before Dec. 1. Eligible homebuyers can receive a break of up to $8,000 on their taxes so long as their gross adjusted income does not exceed $75,000 for singles or $150,000 for married couples.
Coincidentally or not, housing activity has rebounded since the introduction of the credit. Nationally, new home sales and existing home sales have recorded gains for four consecutive months.
The tax credit is scheduled to expire Nov. 30, although there is widespread speculation Congress will vote to extend the program into 2010.
David Kuiper, a mortgage planner at First Place Bank in Holland, Mich., says the credit has been a big spur to sales activity.
"The first-time buyer tax credit has had a huge impact on our local market," Kuiper says. "This month, over 80 percent of our purchase business was first-time buyers."
Weekly national mortgage survey
Results of Bankrate.com's Aug. 26, 2009, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
|30-year fixed||15-year fixed||5-year ARM|
|This week's rate:||5.53%||4.83%||4.95%|
|Change from last week:||+0.01||-0.01||+0.09|
|Change from last week:||+$1.04||-$0.86||+$9.03|
Mortgage consultant Jim Sahnger says the tax credit has been the "largest contributor" to renewed homebuyer interest in his South Florida market. The credit "has provided the additional financial incentives to get buyers off the fence," says Sahnger, who works for the Palm Beach Financial Network in Stuart, Fla.
Dan Green, a loan officer with Waterstone Mortgage in Cincinnati, says the buzz surrounding the tax credit has even piqued the interest of shoppers who earn too much to qualify for the break.
"It's similar to the Cash for Clunkers program -- just an awareness is enough to affect sales," says Green, who is also author of TheMortgageReports.com.
Brian Peart, president of Nexus Financial Group in Atlanta, agrees. "People do what other people do," he says. "If the perception is that everyone is out picking up bargains, more people will do it."
Secondary roleOthers are more tempered in their assessment of the credit's impact. Jeff Lazerson says first-time homebuyer activity is "very heated" in Southern California. However, the president of Mortgage Grader in Laguna Niguel, Calif., flatly states the tax credit is "definitely not" the primary factor driving sales. Instead, sales are soaring because "prices are down some 50 percent for these starter homes, to 2002 price levels," he says.
Sue Woodard, business development consultant for Lakeland Mortgage in Minneapolis, also believes the tax credit's impact has been relatively modest so far. Many home shoppers remain either unaware of the credit or misinformed about how it works, she says.
"I don't think people understand clearly that this is a tax credit -- meaning dollars in their pocket," she says. "(It's) not a tax deduction. (It's a) totally different thing." The credit "just hasn't had enough time to work," but could become a bigger success over time if Congress extends it into 2010, she says.
Policy wish listMortgage professionals also are not shy about suggesting additional housing-related policy actions they'd like to see. Woodard and Kuiper hope the government puts the brakes on the Home Valuation Code of Conduct, which has changed the rules regarding how lenders are allowed to choose appraisers.
Realtors, mortgage brokers, home sellers and others have complained HVCC unnecessarily complicates the home appraisal process. They accuse it of scuttling untold numbers of potential sales. Woodard says HVCC has been "absolutely devastating" since it went into effect in May, and Kuiper says it's "done more harm than good."
A bill introduced in the House of Representatives would implement an 18-month moratorium on HVCC. "It will be coming before Congress in September and desperately needs to get passed," Woodard says.
Meanwhile, Lazerson says the government needs to take a more active role in securing a pathway to subprime lending. Although subprime loans are thought to be at the heart of the housing crisis, such lending "is not in and of itself predatory," he says.
A government effort to guarantee such loans or incentivize the private sector to fill the breach is good public policy, Lazerson says. "Where else can these folks turn?" he asks. "How can this country possibly absorb its housing vacancies otherwise? We don't want to go back to the olden days of knee-breaking loan sharks."
Sahnger says it's difficult to identify a single government program or policy that could act as "a magic bullet" and spark the housing market back to life. However, he would like to see the homebuyer tax credit extended and expanded so that all buyers -- first-time or not -- receive a $15,000 credit.
He also worries the fragile housing upturn now under way could falter if the government does not extend the first-time homebuyer tax credit and the Federal Reserve sticks to its pledge to stop buying up mortgage-backed securities at the end of the year. The latter $1.25 trillion campaign has been credited with driving long-term interest rates -- including mortgage rates -- lower.
"Should either of these two programs go away in 2010, I can see where housing sales and prices will fall further," he says.