30-Year Mortgage Rate Hits 37 Year Low, Borrowers Rush to Refinance

The 30-year mortgage rate dropped for the seventh consecutive week, hitting its lowest level since 1971. This has hit mortgage brokers and lenders with a surge of homeowners and refinance applications looking for a Christmas bonus.

This week's drop of the 30-year mortgage rate to 5.19 percent, according to Freddie Mac is down from 5.47 percent a week ago and 6.14 percent last year.

Mortgage rates have been on this consistent down trend ever since the Federal Reserve announced a program to buy $500 billion in mortgage-backed securities. Mortgage rates sustained drop was further supported by Federal Reserve statements that they would be willing to expand the program if needed and the recent FOMC announcement lowering of the Fed funds rate to a target rate of 0.25-0 percent.

Historically low mortgage rates are bringing in a new wave of homeowners refinancing their homes. Mortgage loan qualifications remain tight; eligible only to high credit scores, sustained income history, and significant home equity.

The downward rate trend is likely to begin helping the failing economy. First, by putting some money back into consumer pocket and perhaps the economy. Second, it is likely to stem some of the risk of additional mortgage crisis at the hands of second wave of ARM and Option ARM rate resets.

Although mortgage applications are sure to also report up to historic levels, mortgage lenders are cautioning borrowers not to wait too long--markets have recently been given to turning sour on a whim.