Press Release - January 16, 2009

The Plain Dealer Article - Featuring First Federal of Lakewood
 
"Mortgage rates below 5% nationwide"
The Plain Dealer
Friday, January 16, 2009
Teresa Dixon Murray
Mortgage rates plunged this week to a new low, dropping to an average of 4.96 percent nationwide. Several local banks, including Fifth Third and First Federal of Lakewood, were as low as 4.75 percent for a 30-year loan. 
 
The drop below the magic 5 percent threshold marks the lowest rates recorded since the Federal Reserve started tracking them in the early 1960s. Rates have dropped for 11 straight weeks, according to Freddie Mac, which has reported weekly averages since 1971.
 
"Isn't this fantastic?" said economist Jack Kleinhenz of Kleinhenz & Associates in Cleveland Heights. He called it "a great opportunity" for people to buy a home or refinance an existing loan.
 
Any 30-year rate that starts with a "4" could be a big psychological draw to consumers, especially skittish ones, Kleinhenz said.
 
Real estate agent Scott Boyer of Russell Realty in Parma said the availability of rates as low as 4.75 percent could push some fence-sitters to make bids. "The way the market flows, you can never, with any certainty, know whether rates will stay this low."
 
But he said he hopes rates will hover at least in the low 5 percent range going into the spring, on top of the incentives of low housing prices and vast inventory. "This should definitely perk the market back up again."
 
Rates have dropped tremendously in the past 2½ months. On Oct. 30, the average was 6.5 percent nationally. The swift decline means the monthly payment on a $150,000 loan would be $802 today, compared with $944 if you had taken out the loan in late October.
 
"This is what we need," said Dianna Hosta-Stickney, chairwoman of the Cleveland Area Board of Realtors. "This might help the pent-up demand."
 
Hosta-Stickney, who's with Re/Max Pros in Westlake, said she thinks the eye-popping rates may get some buyers out looking. "Once that happens on a consistent level, that'll stabilize the market."
 
Jim Madrzak, chief lending officer at Century Bank in Parma, said the lower rates could motivate nervous consumers who are worried about their jobs and are more guarded with their spending.
 
"There is a lot of interest out there. There are a lot of people who want to move," he said. "And refinancing at these rates is really attractive."
 
At Third Federal Savings, calls to refinance have surged the past few weeks and call volume exploded Tuesday when the Cleveland bank's rate dropped below 5 percent, said spokeswoman Monica Martines. Third Federal is this region's largest lender.
 
The customer service lines have been so busy that calls have frequently rolled over automatically to the branches, she said, adding, "We never expected rates to go this low."
 
Madrzak said Century Bank's rates have dropped in recent weeks because the secondary mortgage market, where banks sell their loans, is buying more mortgages. "There's been a real loosening of credit the last couple of weeks."
 
Kleinhenz, the economist, explained that the Federal Reserve's actions to buy mortgage investments is giving the banks a new supply of money to lend.
 
Rates could go even lower, Kleinhenz said, but not too much lower.
 
If you assume an inflation rate of 2 to 2.5 percent, he said, and build in some risk and a little bit of profit, the lowest he could imagine rates going would be 4.5 percent.
 
But as strange as the economy has been, rates could also go up soon. "Even though there might be another low," Kleinhenz said, "if it were me, I'd rather buy right now."