Vashon Homes & Events from Go! Real Estate

Vashon Island Home Finance: The 4.5% Mortgage Rate Proposal

December 11, 2008 at 11:34 pm Leave a comment

In a continuing effort to stimulate and stabilize the housing market, the federal government has floated the idea of having the Treasury Department lower the rate on 30 year mortgages to 4.5%.  This represents approximately 1% below the current rate of 5.6%.  Treasury would implement the program by purchasing mortgage-backed securities from Fannie Mae and Freddie Mac.  Some have suggested that a $50 billion package is appropriate and the National Association of Realtors says the move would yield approximately 500,000 more home sales.

This action would piggy-back on the pre-existing plan to buy $500 billion in mortgage backed securities which has resulted in a surge of lower interest rates and concurrent spike in refinancing activity by borrowers . . . a 50% jump in refinancing activity in a little over two weeks.  Borrowers are seeking to lock in lower interest rates in anticipation of slow recovery from the economic downturn.

While the plan might help people seeking ti buy or sell a home or to refinance an expensive mortgage, it may not help people whose credit is so damaged that banks don’t want to lend to them.  The plan is not designed to change the qualifications for who gets loans.  The best refinancing rates are available to those with impeccable credit – 720 or higher – as well as at least 10 – 20% equity in their homes.

However, despite the good news, the overall number of refinancings this year is only expected to be a quarter of the volume at the height of the housing boom in 2003. 

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Entry filed under: • Real Estate, Housing Market News. Tags: Seattle home finance, Seattle mortgage, Vashon Island home finance, Vashon Island mortgage.