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Mortgages Won't Go Any Lower

By Kevin Spak,  Newser Staff

Posted Mar 20, 2009 8:48 AM CDT
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(Newser) – The extraordinary measures the Fed has taken to reduce long-term mortgage rates may have hit their limits. Lenders are now quoting an average rate of 4.75% on 30-year fixed-rate mortgages, and that’s probably as cheap as it’s going to get, says James Hagerty of the Wall Street Journal. With homeowners banging down the doors to refinance at those already historically low rates, banks would rather expand margins rather than deepen discounts.

“If lenders are working people overtime to close loans, they don't have an incentive to compete too hard on price,” explained one researcher. It’s an uncomfortable situation for the government, which wants to drive rates down, but also wants banks to return to profitability. Even if mortgage costs don’t fall further, the Fed’s efforts should at least help stabilize the housing market, experts say.

Citigroup, under pressure to increase its lending, said last month that it will spend $36.5 billion to issue mortgages, make credit card loans and buy distressed assets in the credit markets.
Citigroup, under pressure to increase its lending, said last month that it will spend $36.5 billion to issue mortgages, make credit card loans and buy distressed assets in the credit markets.   (AP Photo/Brian McDermott, file)
In this Nov. 20, 2008, file photo, a sign stands outside new home for sale in southeast Denver.
In this Nov. 20, 2008, file photo, a sign stands outside new home for sale in southeast Denver.   (AP Photo/David Zalubowski, file)
In this March 3, 2009, file photo, Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, before the Senate Budget Committee.
In this March 3, 2009, file photo, Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, before the Senate Budget Committee.   (AP Photo/Susan Walsh, File)
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