HOUSING: Mortgage rates tumble, making buying cheaper

By ZACH FOX - Staff Writer | Wednesday, November 26, 2008 5:08 PM PST ∞

Interest rates on home loans tumbled Tuesday, making it cheaper to buy a home as the real estate market struggles to end a three-year drop in prices.

Smaller, 30-year fixed rate mortgages for well-qualified borrowers have dropped to as low as 5.5 percent with some brokerage fees, several local mortgage brokers said Wednesday.

Also Wednesday, the Mortgage Bankers Association reported that the average interest rate, including fees, on 30-year mortgages fell to just under 6 percent last week.

But the biggest movement came Tuesday, as investors found bonds much more attractive, driving down interest rates.

"This is one of the most positive things that has happened in a long time," said Don Marginson, founder of City Mortgage, a brokerage in Rancho Bernardo.

Just a month ago, interest rates on mortgages were as high as 6.5 percent. The one percentage point drop in rates translates to a savings of about $200 per month for a $300,000 mortgage, or $69,000 over the life of the loan.

Some brokers said they are hopeful the drop in interest rates stays for a while, hastening a recovery in a battered housing market.

But the housing markets in both North San Diego County and Southwest Riverside County have a long way to go. Prices in both regions have fallen more than 30 percent on average and foreclosures have flooded the markets.

Though lower interest rates might make home-buying affordable for borrowers on the fringe of affording a home, the drop was not significant enough to spur a recovery, said Dave Hopkins, a broker with Rancho Financial in Rancho Bernardo.

"There's not going to be much of an economic impact, and it took billions of dollars from the government to do this," he said.

Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com. Read his blog, "On the Realside," at bizblogs.nctimes.com.

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unable to own wrote on Nov 27, 2008 1:12 PM:this is great news, only what good does it do when the banks are not giving loans... i mean i would love to buy a home i have been renting 13 years fron the same family. but my income and credit does not allow me too.. even people with exceptional credit are being turned down by the banks.. where does it end

REFINANCE PLEASE wrote on Nov 28, 2008 1:46 AM:When came i refinance if the rates are going down and my rates are adjusting every six months. what shall i dO???????

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