Master The Fast-Changing Mortgage Rate Game

N E W   Y O R K, August 21 -- Those rock-bottom mortgage rates aren't so low anymore, and we've just learned that they jumped a full point over the summer to 6.2 percent.

Still, despite the biggest quarter increase in more than 15 years, the buzz among prospective homeowners about mortgage rates is expected to continue into the fall.

As a result of rising interest rates, the refinance boom is beginning to slow down. But, according to an estimate by the Mortgage Bankers Association, U.S. homeowners refinanced their mortgages 25 million times during the past two and a half years, padding their own wallets with between $230 billion and $250 billion.

Although the refinancing market has quieted down, new home purchases continue to roar, and the value of homes continues to increase — forcing many consumers to work harder at getting the most for their money when it comes to financing their homes.

Historically Low Rates

Although mortgage rates have risen since June, it is not too late to take advantage of what are still low rates to refinance your current mortgage or buy a new home.

To put the current interest rates in perspective, a bit of interest rate history may be useful. According to Freddie Mac, the drop in mortgage rates began in mid-2000 when the average rate on a 30-year fixed mortgage dropped to 8.52 percent. In the early 1980s, the average rates were about 17 percent — so the rates in mid-2000 were considered good.

Thereafter, rates dropped steadily and bottomed out in mid-June of this year at an average rate of 5.21 percent on a 30-year fixed mortgage, the lowest rate since Freddie Mac began tracking rates in 1972. Since then, rates have been on the rise, although they dipped slightly again last week from 6.34 percent to the current average rate of 6.24 percent for a 30-year fixed loan.

Interestingly enough, the rate of 6.24 percent is virtually the same as it was at this point last year when rates were at an average of 6.22 percent for the week ended August 15, 2002.That said, people are shying away from refinancing. The number of owners choosing to refinance declined by half since June, according to the Mortgage Bankers Association. However, if you are part of the 39 percent of homeowners who are still paying an interest rate at least 0.5 percent higher than what you would pay if you refinanced your loan, refinancing may be a good idea.