How Does a 4 Percent Mortgage Rate Sound?

March 3, 2009 — -- Here's a thought: What if America tried to steer itself out of its economic mess by reducing the interest on every new mortgage to 4 percent? And what if the country did this not just for people under water or facing foreclosure, but for absolutely anyone?

Would you go for a 40-year mortgage at a fixed 4 percent rate? Some high-profile television money personalities -- Jim Cramer and Suze Orman -- have been talking it up and generating a popular response.

"My thoughts were and are that if interest rates could come down to about 4 percent across the board -- for everyone -- that could start to stimulate the real estate market," Orman said in an e-mail to ABC News. "For many, it may mean that they can keep their homes."

Four percent interest, eh? Right now -- if you qualify -- you can, on average, get a 30-year mortgage at a fixed rate of about 5.3 percent.

That means you would have a monthly payment of about $1,110, on a $200,000 loan.

If you could get a 40-year mortgage at 4 percent, the monthly payment would be about $836. Both figures leave out property taxes, insurance and other possible fees.

Cramer, on his "Mad Money" show on CNBC last week, said the reduced payments could make a big difference for many homeowners.

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"The government gets in and guarantees mortgages for 18 months," he said. "Anybody who wants to refinance or buy, gets a 4 percent, 40-year mortgage. We'll get out of this mess -- like that."

Millions of Americans are clearly eager to stay out of foreclosure -- so much so that trying in the word "avoid" on Google will show that the most common search starting that way is "avoid foreclosure."

So when a possible way to do so comes from some popular figures, it strikes a chord. Various financial bloggers have grabbed on to the idea (with a few claiming they came up with it first).

Whether it is even remotely realistic is another question.

"It would be wonderful for all the borrowers, but I wonder where the lenders are going to get the money," said Stuart Hoffman, senior vice president and chief economist at PNC, a giant Pittsburgh-based bank and financial services company. "Who would be writing these mortgages? Is it the government going in and rewriting every mortgage? Or is it private lenders?"