WASHINGTON -- Saddam Hussein, the United Nations and the Federal Reserve Board may be teaming up to create unwittingly a brief window of opportunity for American mortgage refinancers and new borrowers early this winter.
That's the view of top mortgage-market analysts who've been trying to pinpoint the next bottom in the interest-rate cycle. If their reasoning sounds right to you -- and you've been thinking of either refinancing or taking out a mortgage on a new home -- you ought to get ready to act.
One of the market's shrewdest observers, Lewis S. Ranieri, chairman of Ranieri, Wilson & Co., tells me that, "Personally, I would hold off [on nailing down a refinancing or new mortgage-loan commitment] until mid-December or early January." Fixed-rate 30-year loans in many cities could dip as low as 9 1/2 percent by January, Ranieri says, thanks to credit-easing steps by the Federal Reserve Board.
Anemic demand for new mortgages in a recessionary, end-of-the-year economy will also tend to nudge rates down from their current level, say analysts such as Paul Havemann, vice president of HSH Associates, the nation's largest mortgage rate-monitoring service.
"Rates have been floating down for five weeks," said Havemann in an interview. "But consumers haven't been borrowing mortgage money. I think people are sitting back waiting or they're just scared of doing anything at all with the Persian Gulf situation the way it is."
Havemann's rate-trackers reported that average national fixed rates for 30-year conventional mortgages finally broke the 10 percent barrier last week. The average quote nationwide on Nov. 29 was 9.9 percent, plus 2.2 points. Fifteen-year, fixed-rate loans went for an average 9.7 percent plus 2.1 points. First-year quotes on one-year adjustables averaged 8.1 percent plus 2 points.
Ranieri, Havemann and other analysts agree about the event that will slam shut the rate window that's opening: the outbreak of war in the Middle East.
The United Nations' Jan. 15 deadline to Saddam Hussein, according to Havemann, could be a tripwire for mortgage borrowers as well. If fighting breaks out shortly after that date -- or if the capital markets see it as inevitable before Jan. 15 -- "That's when the window will close."
So what do you do if you've been waiting for the opportune moment to plunge into the mortgage market? If you're buying a home,do some rate-shopping sooner rather than later during December. Tell prospective lenders that you want the option to lock in your rate sometime during the coming 45 days.
If you're potentially in the refinancing market, don't be immobilized by the old "refi rule" that says you've always got to drop a full two percentage points before refinancing makes sense.
The key to the refinancing game is understanding the interplay among your current rate, your new rate and points, how long you plan to stay with the new loan, and your income-tax rate. Anyone with a 10 1/2 percent or higher rate loan, adjustable or fixed, should explore refinancing in the current market.