written with Jeff Kearns
For Mike and Kathryn Fry, the time was right to take advantage of the Federal Reserve’s low interest rates and buy a three-bedroom, two-bathroom colonial home in Arlington, Virginia. They closed in April with a near-record low 30-year fixed-rate mortgage at a 3.75 percent rate.
“It was a combination of our personal finances being ready and rates being great,” said Mike Fry, 28, who works for a financial-services company.
Low rates are bringing buyers back.
That’s good news for Fed Chairman Ben S. Bernanke as it shows his low interest-rate policy is lifting housing out of a six-year tailspin and boosting the economy.
Sales of existing homes rose 9.6 percent in May from a year earlier, with 4.6 million homes changing hands at a seasonally adjusted annual rate, according to the National Association of Realtors. The average rate on a 30-year fixed loan was 3.66 percent last week, compared with 6.8 percent in July 2006, according to Freddie Mac.
Low rates are also encouraging homeowners to refinance their properties, cutting monthly payments and leaving households with more to spend on other goods.
Refinancing volume in the week ended June 15 hit the highest level in three years, Mortgage Bankers Association data show. Still, that was down 27 percent from January 2009, when rates on 30-year loans fell below 6 percent.
One impediment: mortgages that are more than the value of the home after housing prices declined 33 percent from April 2006 to April 2012 on a seasonally-adjusted basis.
“The big remaining problem for the housing market is access to credit,” said Millan Mulraine, senior U.S. strategist for TD Securities in New York. “Until we can unlock that Pandora’s Box, the full impact of the low interest rates won’t be felt.”
See the full report at Bloomberg.com.