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Wednesday, Sep. 10, 2008

Fed takeover a boon to mortgage rates

Sunday's federal takeover of mortgage lenders Fannie Mae and Freddie Mac has caused mortgage rates to fall to the lowest levels since May and sparked a surge in loan refinancings.

Rumors of the pending takeover caused the average national interest rate for 30-year, fixed-rate mortgages to fall from 6.39 percent last week to 6.06 percent, Reuters reported.

By Wednesday, Bankrate.com said the average national rate for a 30-year loan was down to 5.79 percent. The average for Kentucky was 5.78 percent, said Mortgage101.com.

Meanwhile, the Mortgage Bankers Association reported a surge of more than 15 percent nationwide in mortgage refinance applications.

Kentucky Realtors were delighted with the rate decline, which should increase home sales.

Judy Craft, president of the Lexington-Bluegrass Association of Realtors, said it's too early to say how low rates will go, but "the recent drop ... will entice more buyers to enter the market.

"And, this will help keep home prices in the state from decreasing as they did in so many areas around the country," Craft said.

Robert Damron, president of the Kentucky Association of Realtors, said interest rates could continue a gradual decline for months and home sales could rise as a result.

Unfortunately, Damron said, the federal takeover of Freddie Mac and Fannie Mae will not help homeowners who are behind in payments and facing foreclosure.