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Mortgage rates drop to record lows -- for those who can qualify

November 25, 2009 | 12:17 pm

Two weekly reports show Christmas has arrived early for mortgage borrowers, with rates at or near record lows.

In its survey for the week ending today, home-loan buyer Freddie Mac said the average rate for a 30-year fixed rate mortgage had dropped to 4.78%, tying a record set last April. The survey assumes borrowers have good credit, a 20% down payment or 20% equity if it's a refinance, and pay 0.7% of the loan balance in upfront fees and discount points to their lender.

Rates for 15-year fixed-rate loans were the lowest ever in Freddie's survey, averaging 4.32% with 0.6% in fees and points. Details about the methodology and other types of loans are in the release on the website of the McLean, Va., company., the North Palm Beach, Fla., financial information firm, is showing average rates at an even 5%, the lowest ever for its survey of large lenders. The mortgages in the survey had an average of 0.4 origination and discount points.

Details in today's announcement include the following caveat/observation from BankRate's Holden Lewis:

"The good news is that mortgage rates are so low. The bad news is that unemployment is high and rising, causing more homeowners to fall behind on their mortgage payments. As a result, it's harder to get a mortgage because lenders are tightening their underwriting standards -- for example, requiring bigger down payments and scrutinizing borrowers' finances."

Another bad sign for housing in recent weeks has been dwindling applications for loans to purchase homes, perhaps because buyers thought an $8,000 federal tax credit program for first-time buyers would expire.

But with Congress having extended the tax credit and broadened it to include a $6,500 credit for trade-up buyers, the Mortgage Bankers Assn. said today that purchase applications rose 9.6% last week after accounting for seasonal factors. That reversed six straight weeks of purchase-loan declines in the association's weekly surveys.

The bankers association said that, overall, the seasonally adjusted volume of loan applications was down 4.5% from the previous week as efforts to refinance homes dropped off.

-- E. Scott Reckard