The home mortgage market, propped up by more than $1 trillion in government money, is flashing a strong "buy" sign to house hunters.
Extending a summer-long slide, the average interest rate on new 30-year fixed-rate loans nationwide has broken through the 5% barrier to 4.97%, nearing the lowest level in decades, the Mortgage Bankers Assn. reported this week.
And mortgage finance giant Freddie Mac, which separately tracks rates, reported Thursday that the average fixed rate on a 15-year home loan had dropped to 4.46%, the lowest level on record.
Borrowers are taking notice. Loan applications jumped 13% last week and are up 50% from late June, the bankers group said.
Several factors are fueling the trend, including growing confidence that the economy is recovering, an emerging consensus that housing prices are at or near a bottom, and the federal government's push to keep mortgage rates low.
"This is a pretty rare planetary alignment," said Stew Larsen, head of mortgage banking at Bank of the West. "I don't know if I'd call it a boom just yet, but it's definitely a boomlet."
Accelerating this rush to borrow is the suspicion, probably well grounded, that the ultra-low rates may be gone by early next year.
The 5% level is "really the magic threshold," said Brad Blackwell, a national sales manager at Wells Fargo Home Mortgage, the No. 1 home lender. As recently as early last month, the 30-year average was 5.38%.
Bankers say that most of the borrowers are homeowners trying to save money by refinancing but that a growing number of applications are being filled out by prospective home buyers as well.
Andrea and Brian Morrison know well the pull of a mortgage rate starting with a 4. They had been house-hunting for six months when the 30-year fixed-rate average first dipped into sub-5% territory for a stretch last spring.
"We got a lot more anxious," said Andrea Morrison. "We were like 'We've got to take advantage of this because it's not going to get much lower.' "
Brian Morrison works at a door and window company, and Andrea has taken time off from her job as a corporate controller to be with their 7-month-old son. In May, they took out a 30-year loan at 4.875% and bought their first home, a three-bedroom house in Corona.
When rates tumbled last spring, just 20% of mortgages made by the Morrisons' lender, Bank of the West, went to home buyers, with 80% going to homeowners who were refinancing.
