Madison (WKOW) -- A bolt of good economic news had local bankers, mortgage brokers and realtors working the phones, alerting customers to a significant mortgage rate drop.
With the federal government's bailout including the purchase of lots of mortgage-backed securities, a corresponding development was a drop in the rate for a 30 year fixed rate mortgage from 6.5% last month to as low as 5.5% this week.
"It was pretty predictable," Madison Area Technical College real estate program director Anne Blood told 27 News.
But it caught Middleton homeowner Jeff Funk by surprise when he received a call from his loan officer, asking if he was prepared to refinance at the suddenly lower interest rate.
Funk did not hesitate. "Every dollar counts, especially when you're pouring all this money into your 401k and it's disappearing daily."
Monona State Bank loan officer Micha Peterson told 27 News Funk and others acted quickly to capture the significantly lower rate. "We locked a number of people in."
First Wisconsin Mortgage broker Aiman Abozeid said the response to his calls was similarly positive. But Abozeid said there's a hangover from the halycon days of adjustable rate mortgages (ARM) with miniscule interest rates from several years ago.
"Anything under eight percent historically is fantastic," Abozeid told 27 News.
"We're all spoiled. We got the windows of opportunity in the fours and fives and the very low sixes and now, if we're sitting on an ARM, we'r holding out."
Blood said homeowners with adjustable rate mortgages could benefit the most from the opportunity to seize a fixed rate mortgage at the prevailing rates, given the volatility of the economy and the slump in the housing market.
But Blood said the declining interest rate serves only the most credit worthy customers, and housing market recovery will require more people rehabilitating their credit.
"We need an impact on employment," Blood told 27 News. Blood said job losses have robbed homeowners and potential home buyers of the chance to help stabilize the market, and caused even credit worthy customers to question their job security. "Alot is perception."
Abozeid said home loan funds are available, and special programs for first time or returning home buyers, rural homeowners and others provide tax incentives, low down payments, and other inducements to get more people into the market. "It's not all doom and gloom."
Bankers and brokers said it's difficult to tell how long the interest on fixed rate mortgages will be this low, given recent economic swings.