Virginia mortgage rates and industry news

For your reference, most of the content in this blog has been taken directly from interest.com on 1/30/2008.

The Federal Reserve is continuing its campaign to make borrowing cheaper, and boost consumer spending. The Fed's rate-setting committee cut what it charges commercial banks for overnight loans by another half-point on Wednesday -- the fifth reduction in five months and the second in just eight days.

By making it cheaper for banks to borrow money, the Federal Reserve hopes banks will lower the rates they charge all of us to borrow money for everything from homes and cars to holiday gifts and travel.

But you shouldn't expect mortgage rates to fall any further than they already have.

Despite what you've heard about the mortgage crisis, the great majority of borrowers are already finding the money they need at very reasonable rates. The average cost of a 30-year, fixed-rate loan is 5.57% according to Interest.com's latest weekly survey of major lenders taken Jan. 23.

That's the cheapest those loans have been since March 2004, 1.25 percentage points less than they cost last summer and 0.75 percentage points less than this time last year.

All of the turmoil you've heard about -- lenders going out of business, banks and investors losing hundreds of billions of dollars, thousands of employees being laid off, soaring foreclosure rates -- is very real.

But that crisis has really hurt only three types of borrowers:

• Those who need a lot of money -- more than $417,000 to be exact.
• Anyone with bad credit -- those with credit scores below 620.
• And anyone with little or no equity in their home

The Federal Reserve is doing what it can to get the country through the subprime mortgage crisis and avoid a recession by making borrowing cheaper. It acts as the nation's super bank, lending money to the commercial banks we deal with every day. When the Federal Reserve lowers its rates, those banks can obtain the money they need for consumer loans more cheaply.

That doesn't mean rates for all types of consumer loans immediately follow suit, or decline as much as the Federal Reserve would like.

It's actions have the biggest, most immediate impact on short-term loans. Other factors, such as inflation and stock market trends, play a larger role in the pricing of long-term debt such as mortgages.

As a result, the average 30-year, fixed-rate mortgage costs about six-tenths of a point less than it did in September even though the Federal Reserve has lowered its rates by 2.25 points since then.

With the Federal Reserve expected to continue pushing rates lower right through spring, mortgages will almost certainly remain a bargain over the next few months.

Just don't expect them to become better bargains than they are right now.