Mortgage Rates at 30-Year Low

Mortgage rates fell this week to their lowest level in at least three decades, providing a broad incentive for consumers to buy or refinance homes that could generate more spending to prop up the sagging economy.

The reduction in rates, to an average of 6.45% for 30-year mortgages, is expected to spur sales in the weakening housing market and turn millions of people into candidates to refinance their homes at lower mortgage rates.

“We’re past calling this a refinancing boom,” said Dan Gilbert, chief executive officer of Quicken Loans, an online lender. “We’re calling it an avalanche.”

Refinancings nationwide already were on pace for a record year, with volume in Southern California projected to be double that of last year.

But the recent surge in activity has been so brisk that appraisers, escrow officers and title companies all have bulging backlogs.

“It used to take two days to get loan documents; now it takes five. Appraisals are taking 30 days,” said Ron Rinden, a loan officer at Pacific Capital Mortgage Group in Santa Ana, where business has picked up 50% to 60% recently. “Refis today probably won’t close until the end of December,” he said.

Rinden cautioned people considering refinancings about hidden fees, even on so-called zero-point loans, where escrow and title fees can approach $3,000. “You have to find out the true costs at end of escrow,” he said.

The rates for 30-year mortgages have been dropping in recent weeks, largely in response to the slowing economy, the Federal Reserve’s persistent short-term interest rate cuts and, most recently, the Treasury Department’s decision last week to stop issuing 30-year bonds.

On Thursday, Freddie Mac, the secondary mortgage lender, said the average 30-year fixed-rate mortgage dropped to 6.45% from 6.56% last week. That is the lowest since Freddie Mac began tracking the figures in 1971, although some economists said average rates were lower in some periods before 1971.

Some economists said mortgage rates could dip an additional half a percentage point in coming months, close to 6%.

“That will bring more potential buyers into the market,” said Leslie Appleton-Young, an economist at the California Assn. of Realtors, a Los Angeles trade group. “I think it will help to keep the momentum in the market going.” John Karevoll, an analyst at DataQuick Information Systems Inc., a LaJolla research firm, didn’t think the lower rates would be a spectacular help to the housing market. But, he said, “It will push additional buyers into the market that weren’t candidates a week ago, and make it easier for those in the market to buy.”

The survey by Freddie Mac indicated that a large number of lenders were reporting mortgages below the average. In a sample of 80 lenders in Southern California, rates ranged between 6.3% and 6.7%, said Earl Peattie, president of Mortgage News Co., a Morro Bay research firm.

Analysts say the lower rates are certain to accelerate the already hot refinancing market. At Wells Fargo, the Los Angeles regional office is on pace to do a record $1 billion in mortgage applications this month, eclipsing the previous record by 60%.

In California, refinancings have reached 890,889 so far this year, more than double last year’s, according to DataQuick.

In Southern California, 327,209 refinancings have been reported so far, also more than twice the number as last year.

With an average rate of 6.45%, an owner of a house with a mortgage of $250,000 would have a monthly payment of $1,572, or $226 less than the same time a year ago when mortgage rates averaged 7.79%.

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Times staff writer James S. Granelli contributed to this report.