Area Realtors Breathing Easier Over Mortgage Rates

The spike in mortgage rates that had area Realtors fearing for the health of Ventura County’s housing market began to ease Friday amid growing confidence in Asia’s problem-plagued economies.

After climbing as high as 7.25% on Monday, rates dropped to 7% Friday for a 30-year, fixed-rate mortgage, with a few 15-year mortgages going as low as 6.5%.

“We’ve seen a major improvement that no one really expected to see so fast,” said Dina Long, president of DL Mortgage in Simi Valley. “This is good news . . . usually it takes awhile longer.”

Mortgage rates, which have recently rewarded home buyers with near-historic low repayment plans, rose more than a percentage point last week.

The jump caused some to reconsider purchasing and others to avoid refinancing their homes, fearing they would be stuck with a high interest rate.

However, renewed confidence in foreign economies has prompted some investors to pull their money out of government securities like U.S. Treasury bonds and instead invest in overseas markets, such as Japan’s banking system--which is showing signs of reform after nearly collapsing earlier this year.

“Rates have generally drifted quite a bit and will probably continue to do so,” said Roger Heineman, an account manager at Countrywide Home Loans, the nation’s largest residential loan broker.

Real estate brokers and loan institutions also reacted warmly to the Federal Reserve Board’s surprise decision Thursday to slash interest rates from 5.25% to 5%--the second such cut in the past three weeks.

The Fed cut the interest rate a quarter of a percent late last month in an effort to shield the economy from the crises in Asia and South America. Economists predict this latest cut is just one in a series yet to come, reflecting the Fed’s concern over the recent tumult in the global markets.

Though short-term interest rate reductions have no real immediate or direct impact on mortgage rates, their overall effect on the economy usually pays long-term dividends on the home sales market and mortgage rates.

Specifically, lower interest rates would offset the growing credit crunch many businesses and individuals are experiencing, leaving them with more spending power.

Lower interest rates also weaken the dollar’s value overseas, making U.S. products more affordable for foreign consumers and increasing domestic production.

“It’s better for the economy, which increases consumer confidence. And, if people feel better about things, that only feeds the [home] market,” said Kathy Mehringer, vice president of Fred Sands Brown Realty in Westlake Village.

Though the recent jump in mortgage rates had some worried that buyers might reconsider whether to purchase a home or wait, Mehringer added that she hasn’t seen much of a difference, probably due to the current trend of “floating” mortgage rate loans.

This trend, she said, allows buyers the opportunity to purchase a home without locking into a mortgage rate for 60 days. This gives buyers the option of waiting until a lower rate emerges without foregoing the opportunity to purchase the home they want.

“I think that’s been really important,” Mehringer said. “It gives people a lot of options without having to wait for a better rate to come around.”

Industry analysts said mortgage rates will continue to drift along as the economy continues to react to global financial pressures, with rates increasing and decreasing, sometimes from week to week.

“It’s been really tough to predict where [the mortgage rate] is going to fall,” Heineman said. “But rates have generally drifted so I would think that will continue.”