The Truth About Those 4.5% Mortgage Rates You Keep Hearing About

Mortgage and Lending with Guaranteed Rate (NMLS ID #2611) NMLS ID #107432

Business television is abuzz this morning with talk of "4.5% mortgage rates"; this clip  ran on NBC Today.  The news stems from a leaked story the U.S. Treasury will intervene in the mortgage market, lowering rates a full percentage point below current levels.

As cited by every journalist in every publication, however, the story is 100% speculation.  Naturally, that doesn't stop the press from covering it.  When hope for homeowners gets spread in this manner, it's important to remember some facts:

  1. The Treasury doesn't set mortgage rates -- Wall Street traders do.  Historically, rates are based on the Supply and Demand for mortgage-backed bonds.
  2. Treasury intervention doesn't guarantee low rates.  That mortgage rates are up by a .25% since last week proves it.
  3. Zero details about the plan have been confirmed, quoting CNBC.  Everything you've heard about 4.5% rates is a guess at this point.

But, perhaps most importantly, nearly every analyst interviewed has expressed a belief that a Treasury-sponsored stimulus would apply to home buyers only.  Homeowners wanting a refinance, in other words, would be ineligible.

Mortgage rates are very low today compared to where they've been in 2006, 2007 and 2008.  If you think your mortgage rate is too high for this market, reach out to your loan officer to review all of your options.  If rates really do reach 4.5%, you can always refinance again later.

Comments (6)

Donna Harris
Donna Homes, powered by JPAR - - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

From what I've been hearing, this 4.5% would go into effect around February or March, and that's perfect time for when my new home will be complete. I'm very excited for this to be true!  We could save hundreds a month on our mortgage payments!

Dec 04, 2008 04:36 AM
Jim & Maria Hart
Brand Name Real Estate - Charleston, SC
Charleston, SC Real Estate

Hey, Scott. Great advise. Thanks for sharing and I hope that you have a great day, Jim

Dec 04, 2008 04:37 AM
Michael A. Caruso
Surterre Properties - Laguna Niguel, CA

We are hearing this for the past several days, but not sure if there is any meat on the bone here. Although NAR is actively lobbying lower interest rates.

Dec 04, 2008 04:38 AM
Rob & Jeannie Steward - Realtors®
RE/MAX Advantage - Nashville, TN
We Work TWICE As Hard For You! - Ashton Group

Thanks for clearing this up Scott. This kind of false hope interferes with all our efforts of trying to get buyers off the fence. We need these facts to fight the myth.

Dec 04, 2008 04:47 AM
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Scott....  two sad things about this... yes, it would be just for purchases... but hey, that's been 99% of my business in the last 12 months and business was still good.  Besides, buying homes does jump start the economy in several areas...  The second thing....  we need to keep in mind of the fannie/freddie pricing penalties....  if you have scores under 680 and putting 5% down, FHA might still be the better way, even if they lowered rates. Right now, on a 5% down with a 659 credit score, the difference is about 3/4 of a percent to 1 percent difference on a FHA vs convnetional rate.  thanks for sharing this..

Jeff Belonger

Dec 04, 2008 04:49 AM
Mark Phillips

I don't know why it would only be for homebuyers. The people going through foreclosure need Refi options. I also saw that mere speculation of this costs the Us $4 billion in new home sales:

Dec 04, 2008 07:20 AM