Mortgage-Rate Drop Sets off Refinancing Rush

The biggest rate drop in seven years sends homeowners to banks looking for deals
By Jim O'Neill,  Newser User
Posted Nov 26, 2008 8:30 AM CST
In this Feb. 2, 2008 file photo, a D.R. Horton home builder sign in a new development in seen Frisco, Texas. The Fort Worth, Texas-based home builder on Tuesday, Nov. 25, 2008 reported a nearly $800 million...   (AP Photo/Tony Gutierrez, file)
camera-icon View 3 more images

(Newser) – The biggest one-day decline in mortgage rates in 7 years set off a frenzy of refinancing yesterday, as homeowners who'd been waiting for a bargain jumped into the market. The nearly one-point decline was prompted by the Fed's $600 billion commitment to buy mortgage-backed securities, reports Bloomberg. "It's the folks who have been sitting on the sideline,” said a Bank of America exec. “They're jumping in with this news."

Economists praised the Fed’s move, which helped drop the average 30-year mortgage rate from 6.38% to about 5.5%, one saying it "may hasten the day when we finally find a bottom in housing.” Some brokers told the Wall Street Journal it was the most activity they've seen in a year. To qualify for lower rates, consumers will need a credit rating above 720 points and have at least 20% equity in their homes.