Mortgage rates edge higher in historic year

2011 easily won the title as the year with the lowest mortgage rates in the 26-year history of Bankrate's weekly survey. The average rate on the 30-year fixed was 4.65 percent. (The median was 4.69 percent.) Previously, the lowest-rate year had been 2010, when the 30-year fixed averaged 4.86 percent. This year's average was 21 basis points lower than that.

Here's a factoid to put into perspective just how low rates were: This year, the 30-year fixed reached a high of 5.23 percent in the Feb. 9 survey. That 5.23 percent -- the highest rate in 2011 -- would have been an all-time low from the inception of Bankrate's weekly survey in September 1985, up until March of 2009.

In Bankrate's weekly survey, it took 1,225 weeks for the 30-year fixed rate to dip below 5.2 percent for the first time, when it dropped to 5.19 percent on March 25, 2009. In 2011, by contrast, the 30-year fixed was less than 5.2 percent every week but one.

The lowest-ever rate for the 30-year fixed was set Dec. 14, when it dropped to 4.19 percent. Until 2011, the 30-year fixed had never fallen below 4.42 percent in Bankrate's weekly survey. The 30-year fixed lingered below 4.42 percent for the final 19 weeks of 2011.

That's fine and dandy if you can qualify for a mortgage, but there's a belief out there that it's almost impossible to get a "yes" from a lender. "The common misperception is that people cannot get a mortgage today. This is not true," says Jim Sahnger, mortgage planner for FBC Mortgage in Jupiter, Fla. "People are obtaining financing. They may be providing more documentation than in the past, but with rates where they are, it makes sense to give the lender whatever they ask for."

Slowly, incrementally, lenders are updating their standards for refinancing mortgages under HARP 2.0 -- the revised version of the nearly 3-year-old Home Affordable Refinance Program. The program allows homeowners to refinance their mortgages, even if they owe more than their houses are worth.

Until Fannie Mae and Freddie Mac changed the guidelines in October, HARP mortgages had a maximum loan-to-value ratio of 125 percent -- meaning a borrower could borrow no more than $125,000 on a house worth $100,000. This limitation crippled the refi chances of homeowners in places such as Las Vegas and Florida, where home values plunged more than 50 percent from their peak. Under HARP 2.0, Fannie and Freddie impose no loan-to-value limit.

"A lot of people are under the belief that HARP 2.0 is just another program that is great in concept but will lack in delivery," Sahnger says. "For people in areas where values have declined in the past five years, this will be a great opportunity to take advantage of great rates and terms."