Lending Landscape - March 6, 2008

Like the weather in the Salt Lake Valley, a spring thaw seems headed for the mortgage markets. Interest rates dropped, erasing last weeks gains.

The government-sponsored loan buyer said 30-year fixed-rate loans averaged 6.03% for the week ending Thursday, down from 6.24% last week.

Last year at this time, the 30-year rate averaged 6.14%, Freddie Mac said.

Freddie Mac also said 15-year fixed-rate loans averaged 5.47%, down from 5.72% last week. A year ago, the 15-year rate averaged 5.86%.

Short term rates have dropped as well and the Fed is widely expected to cut short term rates again when it next meets in March.

There was big news on Thursday when new loan limits for both conforming and FHA mortgages were released. Salt Lake City received the maximum allowed limit of $729,750 for both programs. The new limits are temporary, available only until the end of the year. The benefits to this change in Salt Lake will primarily be felt in houses above $400,000, where sales have slowed in the last nine months.

The benefits to the mortgage market as a whole will be felt once California homeowners start successfully refinancing homes in financial trouble and the mortgage lenders regain confidence.

A window of opportunity exists in the Salt Lake housing market as the benefits of lower interest rates, lower new home prices and higher loan limits will stimulate demand. All three of these factors will not co-exist for long.