Freddie Chief: Mortgage Rates Close to Bottom

March 30, 2009 No Comments »


These super low mortgage rates are pretty nifty, but they probably won’t go any lower, at least, according to remarks from Freddie Mac interim CEO John A. Koskinen.

After meeting with President Obama last week, he told reporters in Washington that any further downward movement would be “incremental,” adding that now is the time to buy.  Hmm.

Last week, mortgage rates fell to a new all-time low of 4.85 percent on the ever-popular 30-year fixed, a full percentage point lower than where it stood a year earlier.

This has clearly made things more affordable, but there’s still the question of sagging property values, and the issue of getting approved for a loan at these low rates now that underwriting is more, ahem, legit.

“This is more attractive than they’ve ever been and about as attractive as they’re ever going to be,” Koskinen told Bloomberg. “We are going to begin to see a lot of home purchases by people on the sidelines who are suddenly discovering ‘hey I can afford a house.’”

That’s why you’ll likely see more ultra low offers from home builders like Lennar and their 3.625 percent fixed rate.

But you’re not supposed to buy something just because you can afford it, especially if it’ll be on sale in a few months, which may explain the underwhelming purchase demand of late.

However, Freddie’s boss also believes the record low interest rates will be accompanied by a housing recovery, earlier than most industry forecasts that paint a much bleaker picture.

My worry, of course, is that interest rates will eventually “normalize,” and if prices stabilize and eventually rise, how will the next batch of prospective homebuyers afford the mortgageOption arms?

Koskinen replaced former Freddie Mac CEO David Moffett, who served during the conservatorship for just six months before announcing his retirement.

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