Good news amid gloom

If you're looking to refinance your mortgage, you may have to take a number.

The 30-year fixed-rate is about to fall below 5 percent. And this week's Federal Reserve move to slash its target interest rate to a range of zero to 0.25 percent lowered the rate on which most adjustable-rate mortgages are based - meaning homeowners could soon see ARMs of 2.5 percent to 4 percent, mortgage experts say.

"I'd say booming best describes what I'm seeing," Jerome Scarpello, president of Leo Mortgage, in Ambler, said, referring to the pace of activity. "Many, many inquiries to refinance. I locked in someone at 4.875 percent, but the rates are really volatile."

Unlike the two other refi booms this year - in January and again in September - brokers, lenders and even economists are expecting this one to last.

"I'm hiring and training," said Philadelphia mortgage broker Fred Glick, with four loan officers, including himself, staffing the phones at his Center City office.

The average 30-year fixed-rate is officially 5.19 percent, the lowest since records on the rate began in 1971, said Freddie Mac chief economist Frank Nothaft. It fell more than a quarter of percentage point since last week. The one-year ARM now averages 4.94 percent. A year ago, the 30-year fixed was 6.14 percent, and the one-year ARM was 5.51 percent.

This is seventh consecutive week rates have fallen.

"I did one yesterday at 4.125 percent with two points," Glick said. "Both the borrower and I were surprised." Points are fees paid by the borrower at closing.

While experts suggest that borrowers - either buying or refinancing - act now rather than wait, most people appear to be waiting, especially buyers.

The federal government is said to be considering a single 4.5 percent rate for people buying new and existing homes. The housing industry is pushing for 2.99 percent, and both scenarios require the government to buy and guarantee those loans - leading University of Maryland economist Peter Morici to ask: "What next, the People's National Bank?"

Those wishing to refinance today generally need to meet three criteria: Verifiable, sufficient income; equity in property; and good credit. Enough of all three usually will mean the lowest rates.

"The customers are all still very qualified, and the home values have been very stable," said Peter Buchsbaum, of Arlington Capital Mortgage, Jenkintown, with a 50-50 mix of Federal Housing Administration and conventional (Fannie and Freddie) loans.

Government intervention in the credit markets has made this possible, though some say more is needed.

The Fed has yet to address the fact that many consumers no longer qualify for low rates because of tighter lending guidelines, said Gibran Nicholas, chairman of the CMPS Institute, which certifies mortgage bankers and brokers.

While Nicholas expects credit rules to ease in 2009, "those who do qualify for the low rates should act now before either their situation or market conditions change."

Mortgage rates at the end of each quarter and for the most recent week.

Period                       30-year fixed-rate     1-year adjustable-rate

2007 Fourth quarter         6.14 percent          5.51 percent

2008 First quarter         5.85                   5.24

Second quarter      6.45                   5.27

Third quarter         6.09                   5.16

Week ended yesterday*   5.19                   4.94

*Rates are for seven-day periods ending every Thursday.

SOURCE: Freddie MacEndText