Crashing the 5% barrier again

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Interest rates for traditional home loans crashed the 5% barrier again last week, according to a report from a trade group released today.

And, just like that, demand for mortgages jumped back up, as more homeowners lined up to refinance their loans into a number starting with a ‘4,’ the survey by the Mortgage Brokers Assn. found.

The increase was from refinancings, not home buying, the trade group says in its survey. Applications for home loans increased by 8.2% overall from the previous week, but purchase applications fell 1.8% while refi applications surged 14.5%.

The MBA says the contract rate for 30-year fixed-rate mortgages fell to 4.97% from 5.04% during the week that ended Friday.

Upfront points to lenders, including the origination fee, decreased to 1.01% from 1.25% of the loan amount. The survey assumed that borrowers had good credit and that the loans were for 80% or less of the home’s appraised value.

The slight week-to-week drop in mortgage rates has a negligible effect on the cost. Someone with a $417,000 mortgage -- the limit before you get into ‘jumbo’-loan territory and rates go higher -- would pay $2,230.91 a month for a 30-year fixed loan at 4.97%, versus $2,248.75 a month at 5.04%.

But when rates go back up again sometime in the future, who wants to brag: ‘Hey, remember back in 2009 when you could get a loan for less than 5%? I locked mine in at 5.04%!’

-- E. Scott Reckard