With Mortgage Rates So Low, Is Now the Time to Refinance Your Home Loan?
May 25, 2010 — -- Mortgage interest rates are nearing a 50-year low.
Last month, existing home sales jumped 7.6 percent. The median home price is also up 4 percent over a year ago.
So, what does this mean for people who are looking to buy and those who already own a home?
Mellody Hobson, president of Ariel Investments and "Good Morning America" personal finance contributor, appeared on the show to talk about what all this means for you:
Q: What factors are behind the big jump in sales of existing homes?
A: Hobson said Americans took advantage of the federal home buyers' tax credit. In order to qualify, buyers had to sign contracts by April 30 -- and they'll have to close on the home by the end of June. First-time buyers were offered a credit of up to $8,000, while homeowners who were looking to upgrade qualified for up to $6,500 in tax credits under the program.
Q: Where do mortgage rates stand now?
A: Hobson said the current average rate for a 30-year, fixed loan is 4.87 percent. She said that's the lowest rate in 30 years. The 15-year rate is 4.19 percent, and rates for jumbos -- loans of more than $417,000 -- have also fallen, she said.
Q: Why are rates so low? Will they go lower?
A: The financial turmoil in Europe is providing an unexpected windfall for American home buyers, because international investors who are seeking a safe haven are putting money into U.S. treasury bonds, she said. Ten-year treasury bonds are tied to mortgage rates, and the increased demand has driven bond prices up and mortgage rates down, she added.
Hobson said the rates aren't expected to remain so low in the long term.
