ReFi Time: Mortgage Rates Drop On New $800 Billion Intervention

If you’re looking to refinance a home and have cash and good credit, now is a good time to pull the trigger. Yesterday the government announced the latest Federal golden bandaid: a pledge to inject $800 billion directly into the credit markets, news which pushed national average mortgage rates for a 30 year fixed to 5.81%, down from 6.07%, according to bankrate. Bankrate also suggest that if you’re trying to refi to act quickly, before rates rise or home values drop.

Fed, Treasury offer 800 billion dlrs more to credit markets [AFP] (Photo: jenzwick)

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  1. AskCars says:

    ummm “intevention” ?

  2. pixiegirl1 says:

    If home values are going to continue to go down why would I want to pounce now why not wait? Since they are telling people with mortgages to refinance quickly before there home loses more value. Someone please explain this too me!

    • Snarkysnake says:

      @pixiegirl1:

      ‘Cuz as the economy swirls the drain many banks are finding their balance sheets bear no relationship to reality,and they are becoming very gun shy about lending to good customers or bad. Make no mistake- banks and other lenders are using large , ugly lag bolts on the barn door now that the horse has gotten away.We’re kind of in the middle of the beginning of the end of this thing and all of the bad public policy and perverse incentives for business are coming home to roost.Of course,We The People are to blame ,too. We want more than we can afford and we listen to politicians and businesses that flatter our lust for same.

    • SpacemanSpiff says:

      @pixiegirl1: This is advantageous to people with existing mortgages since they are refinancing their existing balance. First, a higher home value means they stand to get more cash back with the refi. Second, the mortgage rate you get depends on your loan to value ratio. A higher home value lowers the ratio which means you may be able to avoid things like PMI.

    • rlee says:

      @pixiegirl1: If the refi lowers your total cost, and the monthly payments are reduced enough to recoup any closing costs in an acceptable time period, why not? As far as I can see, the value of the house is only a factor if it’s dropped enough that you can’t get a refi, or if the price drop means selling instead makes sense.

      • ADismalScience says:

        @rlee:

        You’re more likely to minimize your costs by selling into these temporary strengths than you are by lowering your monthly payment.

        • rlee says:

          @ADismalScience: Not sure what you mean by “selling into these temporary strengths”. If you mean, “selling the house before the price drops further”, then I’d have to say it depends. How soon are you planning to die / move into a nursing home (or your kid’s home) / retire / etc? If you sell, where are you going to live — another purchased home (probably just as likely to lose value)? a rental (probably less cost effective at least in the long run)? For some people, selling would make sense. For most? I’m not convinced.

  3. ADismalScience says:

    If anything, sell. There will be temporary liquidity for another round of FHA buyers who should never, ever, ever actually be sold homes in this environment.

    • Anonymous says:

      @ADismalScience:

      I am in the process of purchasing a home with an FHA loan in the Portland, OR area. Could you explain why you think this is a bad thing?

    • OldElvis says:

      @ADismalScience: I bought my house on an FHA backed security with a 3% down payment. I’m still in the house, and we’ve done very well with it. The FHA makes some people get into a home rather than wait for coming up with 25% down.

    • TechnoDestructo says:

      @ADismalScience:

      With prices down as far as they are now, and mortgages allegedly a bit more rigorous, I think it’s safe to say that the proportion of buyers who can’t pay for their loans this time round will be lower than it has been in the last few years.

  4. TecmoTech says:

    Keep dropping, rates and prices. I am waiting for things to get to reasonable levels. Once that happens, I, and probably many others, will be purchasing their first home.

  5. Demonbird says:

    $700 billion here, $800 billion there, it’s alright. We totally aren’t going to see our taxes go up and not get the promised new social programs.

  6. Streakist says:

    I am sick to death of the government trying to stabilize (price fix) the housing market. It’s simple, Average Income hasn’t gone up in 8 years and Home prices triple in that time. Prices still have room to fall before people can afford them.

    Personally I’d like to see prices fall to the level where the average person could afford a 20yr mortgage like my parents had.

    • TecmoTech says:

      @Streakist:

      100% correct. All you have to do is look at the average income for a household in a city vs. avg house price. Things are still way off.

      • RudeandRude says:

        @TecmoTech:
        What about those people who just purchased houses? If the value of these houses level out to what you are speaking of, then you have a whole new group of people who are screwed and looking for help.

        It’s a vicious circle.

        • TecmoTech says:

          @RudeandRude:

          People need to stop thinking about houses as investments. It’s a place to live. It’s a different animal. You can’t compare it to a stock or a bond or any other normal investment.

          If you can afford the payments and still maintain your standard of living, you are not screwed. If someone bought a house and it costs 40% of their income, it doesn’t matter if the house costs 5k or 500k.

          Who cares if the value fluctuates? Unless you are selling it tomorrow, it doesn’t freakin’ matter.

    • the_wiggle says:

      @Streakist: amen to that. they way things are going, our dream has become a good rental :|

  7. DanC922 says:

    Whoa, whoa, whoa… WHAT?! Does our government even think about the money they throw around? We’re already 10 TRILLION dollars in debt. To tack on another trillion is astonishing. This isn’t money they have. It’s creating debt to pay off someone else’s debt. It’s like no one in this government even cares how much they spend and put us more into debt. We may be a rich country, but that doesn’t mean we have unlimited money.

    • Demonbird says:

      @DanC922:
      Maybe it wouldn’t be so bad if most, if not all, of the folks making these decisions weren’t set for life.
      The Millionaires Club indeed!

    • cmdrsass says:

      @DanC922: They don’t have to care because voters are too dumb to hold them accountable.

      • BrianDaBrain says:

        @cmdrsass: Yeah, ain’t that the truth. With everybody who whined about the first $700B bailout, you’d think less of the Congressmen who voted for it would have been re-elected, but no. They have an idea that they can get away with whatever they want to, because people will forget that they were pissed and vote them right back into office. It’s a sad state of affairs.

        Besides, most of these folks are set for life, as Demonbird pointed out. They don’t think it will matter to them when the value of the dollar plummets due to the trillions of dollars we are “injecting” into this market and that market. It will catch up to us eventually. We’re only postponing the inevitable crash, and we’re making it so much worse in the meantime.

  8. dieselman8 says:

    true. just refinanced myself into a 5.5% 30 year fixed yesterday.

  9. chiieddy says:

    Hrm. Probably not worth the closing costs to refi for < .5 pts.

  10. RudeandRude says:

    If there are 300m people in the U.S., I’ll assume 140m of those are taxpayers. At 800B, that means each taxpayer’s share is $5,714.

    Personally, I’d rather see myself and my wife get a check for $11,428 in the mail.

    I know that’s a pretty naive way of looking at things, but I have to think every household getting $11,428 would stimulate the economy and balance the credit crisis a little bit.

    If your household can’t get out of financial trouble with $11,428, you have more problems than anyone can solve.

    • samurailynn says:

      @RudeandRude: The problem is there are lots of households that aren’t in financial trouble, so the government doesn’t see fit to help them. I see that happen in my personal life too. There are people that I know who are always in trouble, and someone is always giving them something to help them out. Then there are people like me who aren’t in trouble, and never get anything extra because they don’t need help.

    • NotChoinski says:

      @RudeandRude: Of course its taxpayer money (or taxpayer debt, really) so with that $11,428 check expect a $11,428 bill. Or if you think the wealthier strata of society should be bearing a greater load to the tax burden, please don’t be one of those yokels at a Palin rally screaming ‘Socialism!!!’

  11. hypoxia says:

    We bought a home last week but our rate wasn’t locked in until yesterday, when it dropped to 5.5% down from the 6% we were told. And yes, half a percent makes a difference overall. Over the course of our 30-year fixed loan we will save just over $18,000. Doubt we’ll be living there for 30 years, but still. It all adds up, ya know?

  12. vastrightwing says:

    Geeze, you party poopers. Why be such a kill joy? Come on, let’s all keep right on robbing Peter to pay Paul. It’s the way things are in this town.

  13. kwsventures says:

    If you and your wife got those checks, along with the rest of America, inflation would run wild. All that money on consumers hands trying to buy too few items.

  14. NotChoinski says:

    Our local Countrywide is offering to refi us for free (they pay all the related costs, fees, lawyers, etc). Its the second time in a year we’re doing it this way.

    Why for free? I think they get several benefits: They can chalk up another ‘sale’ on their books, plus, the 30 year clock gets reset – with all much of the interest front loaded.

  15. rtmccormick says:

    I just moved up my home buying schedule about 6 months from the new first time home buyer tax credit(tax free government loan more or less) and these rates.

    Anyone who thinks it’s as simple as “Well there are only x amount of mortgages in the US, why don’t they split that up and pay off half of them with that money?” clearly doesn’t understand why we’re in the crapper we’re in. The point of this bailout isn’t so much to help the idiots that screwed themselves by signing up for sub-prime mortgages, it’s so the people that should be getting loans can actually buy houses and the cash reserves can be re-established.