Mortgage rates could fall below 5%, experts predict

01.05.09
By Timothy Jones

The average interest rate for a 30-year fixed-rate home loan is already hovering near record lows, but now experts are forecasting they could dip even lower.

According to a report in the Wall Street Journal, the Federal Reserve's intention to purchase billions of dollars of mortgage-backed securities in the first half of the year has already given the mortgage-bond market a boost - which means better rates for borrowers.

Ever since rates began falling from above 6 percent, many homeowners have been rushing to seize the opportunity to refinance their existing home loan to a lower rate.

According to Freddie Mac, the rate for a 30-year mortgage is currently around 5.10 percent. While this may seem like a very good deal, some analysts' predictions suggest it may even be worth waiting to see if rates drop even further.

Barclays Capital strategists Derek Chan and Nicholas Strand told the news provider that the Fed's plan "stands to drive mortgage rates even lower, possibly to 4.5 percent."

So far, only a small proportion of those taking advantage of the record rates are new borrowers. According to the most recent weekly data from the Mortgage Bankers Association, around 83 percent of home loan applications were from existing homeowners.

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Home loan rates could drop lower