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Mortgage Rates Hit Two-Year LowAired January 12, 2001 - 4:06 p.m. ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JOIE CHEN, CNN ANCHOR: We mentioned to you the drop in home mortgage rates -- certainly you were listening for that. Triggered by the half-point reduction by the Federal Reserve, the average rate on a 30-year loan now stands at 6.89 percent. The average rate for 15 years, even lower: 6.49 percent. Both are the lowest rates since April of 1999.
Now, over the life of a loan, those innocuous numbers mean thousands of dollars in interest payments, and that's why mortgage holders now face a decision.
From Chicago, here's CNN's Jeff Flock.
JEFF FLOCK, CNN CORRESPONDENT (voice-over): Jill Balick is still waiting to lock in a rate on her home mortgage refinance.
MARY CURRAN, MORTGAGE BROKER: I have good news.
FLOCK: Since mortgage broker Mary Curran called Balick last week with news of the Fed rate cut, we've been following them as they plot when they think mortgage rates will hit their lowest point and, consequently, when to lock in their rate.
JILL BALICK, MORTGAGE HOLDER: It's really been a roller coaster -- when to lock, and then you get greedy, you know, is it going to go lower?
FLOCK: Mortgage rates have now dropped below 7 percent for the first time in two years. The government says a 30-year fixed rate mortgage now averages 6.89 percent.
But Jill's not jumping yet.
BALICK: What would the difference be in payment?
FLOCK: Refinancing a $185,000 loan from, say, 8 percent to 7 1/8 cuts the monthly payment from $1,357 to $1,246. That's a savings of $111 a month. If the rate goes lower, you save even more.
CURRAN: It gets tempting to keep waiting and waiting and waiting. FLOCK: But the mortgage broker points out that there is no guarantee that banks will drop their mortgage rates beyond what they are now.
CURRAN: A lot of times, when there's a strong refine market, there's a supply and demand factor that can kick in: Why have a sale when we have all these people that want our money?
FLOCK: Thousands have already taken the plunge. According to the Mortgage Bankers Association, home loan applications were up 61 percent from the previous week, and more than half were refinances.
(on camera): And maybe the best news is the money saved from refinancing, typically, is either used to pay off additional debt or is plowed back into the economy, giving it a boost. The only trick is not to wait too long until interest rates rise again and you lose your chance.
I'm Jeff Flock, CNN, in Chicago.
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