Mortgage rates slide to near-record lows

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Mortgage rates slid to near all-time lows in Bankrate’s weekly survey, and may fall further as you read this sentence.

The benchmark 30-year, fixed-rate mortgage declined 8 basis points, to 5.29 percent, according to the’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 0.33 discount and origination points. One year ago, the mortgage index was 5.98 percent; four weeks ago, it was 5.41 percent.

The benchmark 15-year, fixed-rate mortgage declined 2 basis points, to 4.86 percent. The benchmark 5/1 adjustable-rate mortgage declined 10 basis points, to 5.24 percent.

Bankrate’s survey occurred before the Federal Reserve’s March 18 announcement that it plans to buy $300 billion of long-term Treasury bonds and $750 billion in mortgage-backed securities. The new purchases are in addition to an earlier Fed pledge to buy up $500 billion in mortgage-backed securities. Mortgage rates tumbled in the wake of the announcement.

Weekly national mortgage survey
Results of’s March 18, 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: 5.29% 4.86% 5.24%
Change from last week: -0.08 -0.02 -0.10
Monthly payment: $915.23 $1,292.81 $910.11
Change from last week: -$8.21 -$1.71 -$10.25

The Mortgage Bankers Association reported that mortgage application activity rose sharply for the second straight week.

Applications increased 21 percent for the week ending March 13 when compared with one week earlier. Most of the new activity was due to refinancing, which was up 30 percent. Applications for new purchased homes edged upward by 1.5 percent.

Mortgage refinance details emerge

Homeowners hoping to trim monthly mortgage payments are learning more about who is eligible for the government’s new Home Affordable Refinance program.

Officially announced March 4, the refinance effort is one part of the similarly named $275 billion Making Home Affordable program, which is intended to help up to 9 million struggling borrowers stay in their homes.

Early details about the refinancing program were relatively scant. Initially it was reported that eligibility would be restricted to:

  • Owner-occupied primary residences.
  • Conforming loans owned or securitized by Fannie Mae and Freddie Mac.
  • Homeowners current on their mortgages.
  • Mortgages that don’t exceed 105 percent of the property’s current market value.

Fannie and Freddie recently released comprehensive policy guidelines to lenders and servicers. As a result, a more complete picture of the program is beginning to emerge.

The biggest surprise involves a shift in which property types qualify. Fannie and Freddie now say owners of second homes and small investment properties also can refinance.

Brad German, senior director of public relations at Freddie Mac, says the reason for expanding coverage beyond primary residences is “pretty straightforward — (to) help stabilize neighborhoods and housing markets by reducing the number of foreclosures.”

Homeowners with poor credit also get a big break from the announced rules. In most cases, no minimum credit score is required to refinance.

Other important areas of agreement between Fannie and Freddie include:

Private mortgage insurance. Homeowners who already have PMI must maintain their present level of coverage on the new loan. However, borrowers who do not have mortgage insurance on their current loan do not have to carry insurance on the new loan, even if the mortgage has a loan-to-value ratio of more than 80 percent.

Second mortgages. Second mortgages will not prevent borrowers from refinancing so long as creditors agree to resubordinate the secondary liens.

Despite these similarities, there are also some key differences in what the two companies are offering, as Bankrate’s Holden Lewis has reported.

In a nutshell, homeowners with Fannie loans can choose from a greater range of lenders than borrowers with Freddie loans, who are restricted to negotiating a new rate with their current lender or servicer.

On the other hand, Freddie will charge a maximum fee of 0.25 percent of the overall loan balance, much lower than the up to 3 percent that Fannie will charge riskier borrowers.

Early interest

Lenders are expected to begin issuing new loans under Home Affordable Refinance early next month. Early signs indicate that homeowners may be responding to the government’s overtures.

For example, the Homeownership Preservation Foundation, a Minneapolis-based nonprofit that works with homeowners to prevent foreclosure, recently said an average of 13,500 borrowers have called each day inquiring about help since President Barack Obama’s March 4 announcement, a three-fold increase over earlier call volumes.

Dan Green, a Cincinnati-based Certified Mortgage Planner and author of, expects that trend to grow in coming weeks.

“There’s been a direct correlation between media coverage and the number of homeowner inquiries,” Green says. “I expect interest to resurface in early April.”

Green is hopeful that Home Affordable Refinance will pay dividends for individual homeowners and the limping American economy.

“Lower payments are good for households and good for the economy,” Green says. “If just one additional family gets access to today’s low mortgages rates, the program is a success.”