The average interest rate on 30-year mortgages climbed more than usual this week, but what broke a record was a lesser- known rate.
The average interest rate on existing residential mortgages nationwide, including rental properties, was 5.96 percent in the first quarter of this year, the lowest since the federal Bureau of Economic Analysis began compiling such data 33 years ago. Figures show that it was the first time since 1977 that the average fell below 6 percent on outstanding, residential mortgages.
Frank Nothaft, Freddie Mac vice president and chief economist, said people are taking advantage of current rates by refinancing, driving down the quarterly average on existing mortgages.
Refinancing has been a method for many who have lost income in this economy.
But it's been out of reach for a vast segment of homeowners, said Sondra Cochran, head of the nonprofit Wyandanch Community Development Corp., which offers loan modification and mortgage counseling.
Either their credit scores are too low because they’ve relied on charge cards to survive, or they can’t afford to refinance, she added.
In the past six months, only one person has asked about refinancing, Cochran said.
“Refinance equals fees,” Cochran said. Struggling homeowners “look at loan modifications as the big savior. Everyone wants the loan modification with the low interest rate.”
That rate is 2 percent, according to the federal homeowners rescue program, which sets guidelines for changing mortgage contract terms to lower monthly payments. Earlier in the program, lenders usually balked at giving out 2 percent, ever since the Obama administration summoned them to the White House for a chastising two years ago this month they have been willing to meet the rate.
Cochran said not everyone will qualify for refinancing or low-rate modifications, but knowing what they're jumping into might help.
“Get financial education first, just don’t jump into anything doing with mortgages anymore," she said. "The educated consumer is the one who succeeds.”