homeWelcome, sign in or click here to subscribe.login
     


 

 

Real Estate


print  email to a friend  reprints add to mydjc  
Tom Kelly
Tom Kelly
The Real Estate Adviser

September 18, 1998

Rates are low: It's time to act

By TOM KELLY
The Real Estate Advisor

The head of Washington Mutual's residential loan operations has seen interest rates tumble many times but he doesn't expect a stampede by borrowers to lock-in loans that have sunk to their lowest point in 20 years.

"There are still a lot of projections that interest rates could go even lower," said Steve Freimuth, executive vice-president for lending administration at Washington Mutual -- which has suddenly become the nation's biggest thrift and its second biggest mortgage lender. "Since there is not a lot of pressure for rates to go up, I expect people may wait and see just how low they will go."

The complex international mortgage market has been influenced by the continuing economic problems in Asia, Russia and Latin America. As a result, analysts say this country's strong economic growth will slow down, driving interest rates lower. The Federal Reserve, which considered raising the rates to curb inflation a few short months ago, now is considering a drop in rates.

When home-loan rates are low, consumers historically have chosen fixed-rate loans. Thirty-year, fixed-rate programs have averaged about 6.5 percent last week while 15-year, fixed-rate loans have been offered at 6.25 percent. Both packages carried a loan origination fee of about 1.5 percent of the loan amount.

"While many customers want that predictable monthly payment for years to come, others are attracted to the adjustables," Freimuth said. "We have loans with a start rate of 2.95 percent which is a great option for a customer looking for that low, initial payment."

Freimuth has guided the once-conversative bank's philosophy of plain-vanilla, 30-year, fixed-rate loans to a huge conglomerate with virtually every loan package available.

Washington Mutual, promoted as "A Friend of the Family" to Northwest consumers for decades, completed the acquisition of American Savings in 1996 and last year purchased Great Western Financial Corp. in an eye-popping stock swap valued at $6 billion. Earlier this year, Wamu acquired H.F. Ahmanson, the parent company of Home Savings Bank of America. Ironically, it was Ahmanson that attempted a hostile takeover of Chatsworth, Ca.-based Great Western before losing out to Washington Mutual.

Most of Washington Mutual's adjustable-rate mortgages had been tied to United States Treasury indices. However, American Savings and Great Western offered many ARMS tied to the Cost of Funds (COFI) and London Interbank Offered Rate (LIBOR) the past few years. Wamu has added some of those loans to its present mix.

"We have definitely picked up some adjustable-rate loan ideas along the way," said Freimuth. "We want to continue offering different options because our customers need variety. We will not concentrate solely on fixed-rate loan programs because rates have come down."

Other representatives from the housing industry say "home and loan" activity is not what it could be. John Renouard, broker at Century 21 Advantage, said consumers have probably become complacent with home-loan rates being historically low for so long.

"I don't think people are really taking advantage of what they are able to buy," Renouard said. "In some cases, what they are missing is truly amazing. If they are renting and have the ability to buy, it's crazy. Some people have the resources and are not utilizing them."

Renouard said his company had good sales results in August -- one of the biggest vacation months of the year. However, now that school is back in session, potential home buyers and sellers typically return to the market.

"We have 180 townhomes in Everett and have six or seven a month the past few months," Renouard said. "The first week of September alone we sold three -- which indicates people are back from vacation and back on the housing bandwagon."

Richard Morse, a real estate attorney and owner of Escrow Network, Inc. said the lower rates are not only keeping new buyers in the market longer but the rates also enticing more potential sellers to test the waters.

"People see that lower rates mean they can afford more house," Morse said.

"The new purchase market continues to be strong because there are buyers out there who could not afford to own when rates were at eight or nine percent.

"They are less focused on the actual listing price -- say $195,000 or $205,000 -- than the monthly figure they have to spend. They are now saying 'I have $1,202 to spend on housing each month, period. What can this buy me? I will consider any loan."'

If you are in the market for a home or new loan, start considering your options.



Previous columns:



Email or user name:
Password:
 
Forgot password? Click here.