Mortgage Rates Stay Flat; Refis in Flux


Mortgage rates stayed largely unchanged from last week to this week, the week ending February 27, 2009. The average rates on 30-year fixed-rate mortgages (FRMs) held steady at 5.32%, while rates on 15-year FRMs rose slightly from 4.91% to 5.01%, according to the Rate Index.

Rates remain below recent highs reported earlier this month, and continue to hover around historic lows as concerns over the economy and rising government debt held rates steady.

"Mortgage rates were little changed this week amid mixed data reports of a slowing economy," said Frank Nothaft, Freddie Mac vice president and chief economist, in a press release. "Both the core Producer Price and Consumer Price Indexes ticked up in January, higher than the market consensus, while consumer confidence in February fell to the lowest reading since records began in January 1967."

Even though rates are holding steady, mortgage activity has been anything but stable in recent weeks. Refinance activity dropped off sharply during the week ending on February 20, as compared to the previous week, according to data from the Mortgage Bankers Association. Overall mortgage applications were down 15% last week compared to the previous week, after spiking by 46% during the week prior.

If you're considering a refinance to take advantage of the current low rates, make sure you weigh the costs of a mortgage refinancing against the potential savings. If refinancing works for you, but you’re waiting around for rates to get a little bit lower, remember that it's very difficult to accurately predict trends in mortgage rates. Furthermore, government-backed mortgage giants Freddie Mac (Stock Quote: FRE) and Fannie Mae (Stock Quote: FNM) are scheduled to raise the fees they charge on certain mortgages starting April 1. That means that even if rates do head lower, your refinancing costs might rise.

Best advice: Shop around for the best rates, and if it makes sense to refinance, do it. The benefits of waiting for another drop in rates may not be worth the risk. For example, Citibank (Stock Quote: C) currently offers a 30-year FRM at 5.875% to qualified residents of the New York metropolitan area. If you waited for rates to drop another 0.25 percentage points, you'd wind up saving $31 per month on a $200,000. Meanwhile, the new fees from Freddie Mac and Fannie could cost you from $500 to $1,500 in extra closing costs.

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