Mortgage Rates

Call it the mortgage morass. It's that perplexed, exasperated feeling you get when trying to refinance a mortgage without knowing how to proceed."It's all incredibly confusing," says Sidney Lenz, a senior vice president for Countrywide Funding Corp., a national mortgage banking firm with offices in Maryland. "Most people don't understand the options available to them in the mortgage market."It's rational to take your choice seriously -- to shop for the lowest rate you can get. But if you believe that mortgage rates are near bottom, it's irrational to let indecision keep you from commiting.

Holiday bills have you worried? Bracing for your mortgage payment to reset higher? Have a certificate of deposit coming due? In all three situations, the Federal Reserve plays an underlying role. And since September, that role has been to help push the interest rates on your credit card, mortgage and savings accounts lower. On Tuesday, the Fed lowered its benchmark rate to 4.25 percent from 4.5 percent, its third cut this year. In a falling-rate environment, here is what to expect, and what you may want to do to make the best of it: Monitor mortgage rates.

Home sales across the Baltimore metropolitan region showed their first gain in 16 months in January, a sign that buyers are returning to the market in advance of the crucial spring selling season. The 2,156 units sold in Baltimore and the five surrounding counties last month marked a 3.75 percent increase from January 2006 and reversed months of double-digit declines, according to sales data released yesterday by Metropolitan Information Systems Inc., a Rockville firm that tracks homes sold through the multiple listing service.

With mortgage rates on the rise and the volume of refinancing decreasing, the prevalence of 15-year fixed-rate mortgages remained constant last quarter compared with the first quarter of 1999.Freddie Mac reported that its quarterly refinancing study found the popularity of the 15-year term was unchanged from the first quarter for borrowers holding 30-year mortgages, while it decreased for borrowers with 15- and 20-year terms.According to the study, 31 percent of borrowers refinancing 30-year mortgages decided to refinance into 15-year loans, while 59 percent stayed with the 30-year, both unchanged from the first quarter of 1999.

FACED with mortgage rates over 8 percent, homebuyers are rediscovering a type of loan that's been out of favor for most of this decade: short- and intermediate-term mortgages that cut your fixed rate by a half to a full percentage point.Mortgage companies and large investors such as Freddie Mac report that three-year, five-year and seven-year loans -- all with optional features converting to 30-year financing -- have suddenly begun pulling in rate-sensitive buyers and refinancers. The national financial reporting service HSH Associates, which surveys more than 2,500 lenders, found that last week five-year "hybrid" loans carried average rates of 7.38 percent nationwide compared with 30-year conventional mortgage rates averaging 8.01 percent.

For homebuyers who have been frantically shopping to find a home but haven't checked in with their mortgage lender lately, it might be wise to make a call -- rates are on the rise.Mortgages for a 30-year, fixed-rate loan have shot up to 7.75 percent in the Baltimore metropolitan market after having been as low as 6.5 percent last fall.The last time fixed rates were that high in the Baltimore area was Oct. 31, 1997, according to HSH Associates, a New Jersey firm that tracks and analyzes mortgage rates.

Mortgage rates in the Baltimore metropolitan area are knocking on the door of 8 percent. But is that cause for concern? Will higher mortgage rates begin to choke the area's 2-year-long housing boom?"

The housing market was full of ups and downs in the third quarter as existing-home sales in most states were on the rise, while construction of new homes slowed across the country during the same period.The National Association of Realtors reports that total sales of existing homes rose in 38 states and the District of Columbia in the quarter, with the strongest increase coming in Vermont.Maryland was among nine states that recorded at least a double-digit increase in the third-quarter resale rate compared with 1998.

THE DROP in long-term interest rates -- as evidenced by record low yields on the benchmark 30-year bond -- is having an impact for consumers: Mortgage rates are falling, for instance. But not everyone is benefiting. Home loans are cheaper, but those on fixed incomes are now getting lower returns on their investments. Who are the winners and losers when rates fall?Harold EvenskyPrincipal, Evensky, Katz & Levett, a Miami financial consulting firmIn fixed income, the losers are going to be the people who have fixed-income investments who have not diversified their holdings such as someone who invests in one-year CDs and rolls them over each year.

By most standards, 1997 should have been a breakout year for existing and new home sales in the Baltimore metropolitan market.After all, the economy was growing. Consumer confidence was reaching all-time highs. Inflation was practically nonexistent. And mortgage rates were stable and drifting lower toward year's end.But new home sales, which were expected to rise perhaps 3 percent, sagged consistently behind 1996 numbers. And it wasn't until September that existing home sales really began to show some signs of life.

CHICAGO -How long can they stay this low? Less than a day after the Federal Reserve said it would double its purchases of mortgage debt, fixed rates on conforming 30-year mortgages dropped as much as half a percentage point to under 5 percent, and there's thought that rates aren't headed back up soon. A check of Web sites yesterday showed rates ranging from 4.625 percent to 4.75 percent, not including points, for the most credit-worthy customers. Except for a day or so in December, rates are at the lowest levels since at least 1965, according to Freddie Mac. Mortgage rates were already at near-record lows.

WASHINGTON -The Federal Reserve said yesterday that it will deploy an additional $1.2 trillion to try to lower interest rates and stimulate the economy, an aggressive move aimed at containing the recession. The central bank will increase its purchases of mortgage-backed securities by $750 billion, on top of a previously announced $500 billion. It also will double its purchases of debt in Fannie Mae and Freddie Mac to $200 billion. Those steps are intended to lower mortgage rates - analysts expect the rates will fall 0.25 to 0.50 percentage points as soon as today.

The economic turmoil of 2008 has left few bright spots, but here's one: Mortgage rates have plummeted. Rates on 30-year, fixed loans are hovering around 5 percent - the lowest level since Freddie Mac began tracking rates in 1971. Some economists predict a further slide in rates once Barack Obama becomes president and rolls out an economic rescue plan. And that could mean thousands of dollars in savings for Maryland homeowners. "The people who have done everything right are now going to benefit, and will be very well rewarded," said Mari Adam, a financial planner and owner of Adam Financial Associates Inc. in Boca Raton, Fla. "We are saying to our clients, anyone who can refinance should refinance.

With mortgage rates at historic lows - 4.75 percent from several lenders in mid-December - a new legal settlement from the Federal Trade Commission offers a cautionary note for consumers, especially if they are minorities: Watch out. The rates and fees you're quoted could violate federal law. In a settlement agreement with a national mortgage company, the FTC alleged that minority refinancers and home buyers were charged higher fees and rates than white...

Commercial bakery opens in Halethorpe Bakery Express opened a new manufacturing facility with 300 employees yesterday on Hollins Ferry Road in Halethorpe. The commercial baking company is the lead tenant in a new 210,000-square-foot plant that was redeveloped by Baltimore-based Merritt Properties. Bakery Express consolidated three divisions from other Baltimore locations into the renovated building: a division that makes baked goods for 1,100 7-Eleven stores in the mid-Atlantic; Ms. Desserts, which serves restaurants; and Jeanne's Gourmet, which bakes goods for school and nonprofit fundraisers.

Mortgage rates aren't what they used to be - and not just because they're higher. You can normally predict the going rate for a 30-year fixed mortgage by looking at the yield on 10-year Treasury notes. If the yield is 3.8 percent, as it was in the middle of this month, you'd expect mortgage rates would be a bit less than 51/2 percent. Instead, they were hovering around 61/2 percent. As Treasury yields dropped earlier in the summer, in fact, mortgage rates stayed steady or even rose. Joseph Bell, a Wonk reader who's thinking of buying a house, wonders: "Is there any reason for this?"

CHICAGO - The Federal Reserve has aggressively cut interest rates. Houses are sitting around unsold. The stage appears to be set for mortgage rates to fall as lenders compete to attract that scarce quarry: the well-qualified homebuyer. You wish. Rates on 30-year fixed-rate mortgages have remained stubbornly above 6 percent for months. Interest rates on those loans are averaging 6.09 percent, mortgage investor Freddie Mac reported Thursday, an increase from the 6.08 percent the previous week.

Mortgage rates show signs of getting back to normal, suggesting that last week's extraordinary action by the Federal Reserve is having its intended effect. Normally the yield on long-term Treasury debt is a good indicator of where mortgage rates will head. But lately the relationship has broken down. Treasury yields fell while mortgage rates rose. The difference between the 10-year Treasury yield and the 30-year fixed mortgage rate was about 1.5 percentage points early this year. But in late February the gap started getting wider and eventually yawned far past 2 percentage points.

Don't look for the Federal Reserve's rate cut to revive the housing market. Mortgage rates already sit near historic lows. But larger forces are aligned against a revival: Falling home prices, tighter lending standards, and rising unemployment all are limiting how many people can buy homes, and how much they can spend. "No matter what happens to mortgage rates, housing is not going to turn around," said Patrick Newport, an economist with the forecasting firm Global Insight, of Waltham, Mass.

Is it a refi renaissance? Or a fast-closing window of opportunity? Nobody can answer these questions for certain, but there's no doubt about this: Thanks to the lowest mortgage interest rates in a year and a half -- an average 5.73 percent for conforming 30-year fixed-rate loans and 5.21 percent for 15-year loans -- nearly 60 percent of all new mortgage applications by mid-January were for refinancings, according to data compiled by the Mortgage Bankers...