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A sharp drop in mortgage rates couldn't have come at a better time for Utah, which is struggling with a downturn in residential real estate.
Thirty-year fixed mortgage rates, which nationally have averaged in the 6 percent range for much of the past two years, last week fell to 5.73 percent from 6.05 percent the previous week, the Mortgage Bankers Association said Tuesday.
Fifteen-year loans averaged 5.21 percent in the week that ended Jan. 4, down from 5.61 percent the last week in December.
Tim Roush, of Veritas Funding in Murray, said the drop has not gone unnoticed, pointing out that refinance applications are up 40 percent. "This is such a great time to buy or refinance a house."
The dip comes at a time when Utah's once-hot housing market has cooled. Part of the problem is that mortgage companies, stung by rising defaults and foreclosures, have tightened lending standards, which have made it harder for many consumers to refinance or buy a home on credit.
Another problem is that after several years of significant home-price increases along the Wasatch Front, diminished affordability has become a key issue. A family that could have qualified for a $150,000 home several years ago, for example, might not be able to qualify for a similar home with a $240,000 price tag today.
Lower mortgage rates help address both problems because lower financing costs translate into lower monthly payments, said Sterling Thomas of the Utah Housing Corp., which aims to help low-income families buy homes.
On a $200,000 loan at 6.05 percent, the monthly principal and interest payment would be $1,206, he said. At 5.73 percent, the monthly payment would be $1,165, or $41 less.
Because of the differences in monthly payments, monitoring mortgage rates and locking in when rates take a temporary drop can pay big dividends.
Stephanie Jensen, of Logan, who struggled to buy a home last summer, had been watching mortgage rates for weeks hover around 6 percent when one day they dipped. She locked in on a 30-year loan at 5.34 percent in July before rates quickly drifted back up.
"I'm now paying less each month for my mortgage than I was paying in rent," said Jensen, who received assistance from Utah Housing. Thomas said the lower rates also can help people with adjustable-rate loans that are resetting or already have reset by making it a bit easier for them to qualify for fixed-rate loans.
The beauty of the lower mortgage rates, said Roush of Veritas Funding, is that they should remain low - in the 5.5 percent to 6 percent range for a 30-year loan - for much of the year.
Wells Fargo economist Kelly Matthews generally agrees. "For at least six months, I see mortgage rates staying near right where they are now."