This week's Federal Reserve surprise - a sharp cut in its benchmark interest rate - helped push already sinking mortgage rates to their lowest levels in nearly five years.
Such numbers led to a wave of calls from consumers looking to find out whether they'll save money by refinancing, particularly those with adjustable-rate loans that will soon reset with higher monthly payments.
"It's crazy. It's like the floodgates have opened up," said Denise Shipowick, who runs 1st Primacy Mortgage Corp. in Bel Air with her husband. Their phone began ringing before 9 a.m. yesterday, and by 1 p.m., the number of pre-qualification applications in the works had doubled from last week.
Rates for 30-year fixed mortgages hovered around 5.5 percent yesterday, with some dipping into the 5.25 percent range early in the day, according to area brokers. That's just a hair above the record lows recorded in June 2003, when the housing market was flourishing.
When the Fed cut a key interest rate by three-quarters of a percentage point Tuesday, it had no direct effect on fixed mortgages. But it got consumers' attention. That, coupled with the lower mortgage rates, which have been driven down by their connection to 10-year Treasury bonds, sent homeowners on the hunt for deals.
And brokers, who until recently were fishing for business in a weakened housing market, were more than happy to welcome the attention. But they were quick to point out that the rules for securing credit have changed significantly from the boom days of a few years ago.
That's when home sales skyrocketed, lenders offered scores of subprime loans to people who often couldn't afford the bills, and mortgage professionals were so busy it was tough to get them on the telephone.
"We're having to deal with higher-credit individuals now," said Greg Rast, senior vice president of Susquehanna Mortgage Corp. in Owings Mills.
Some of his refinancing requirements include a credit score in the mid- to high-600s and no late payments on anything in the past three years. For homebuyers, add to that bigger down payments and fewer mortgage options.
Those who owe more than their homes are worth, have little to no equity in the dwelling or can't provide proof of income, are likely out of luck.
There are "some big hurdles to getting credit," said Greg McBride, a senior financial analyst at Bankrate.com, which surveys thousands of financial institutions to determine average rates for consumers.
