30-year mortgage rates fall to 5.76%

Only those with good credit and equity in their homes will be able to refinance.

MIAMI (AP) — Mortgage rates fell for the second day in a row Wednesday, and could be heading toward levels home buyers and owners haven’t seen this year.

That drop is what the Federal Reserve was aiming for when it announced a plan Tuesday to buy $600 billion in mortgage-related securities in an effort to slow falling home prices and rising foreclosures, while kick starting demand among fearful home buyers.

The average interest rate on a 30-year fixed-rate mortgage Wednesday was 5.76 percent, the lowest it has been since February, according to HSH Associates, which publishes mortgage information. The lowest daily figure this year was 5.47 percent on Jan. 23.

Mortgage brokers fielded a steady stream of calls Wednesday from borrowers looking to refinance. But some of those callers were confronted with an unwelcome truth: Only those with good credit histories and equity in their properties need apply. And with the damage wrought by the real estate downturn, now in its third year, that number has declined dramatically.

Lower rates won’t mean much for the more than 4 million homeowners who are already behind on their mortgage payments, or the 12 million homeowners who owe more money to the bank than their homes are now worth.

“This will help the non-troubled borrower, the standard consumer who is making payments on time,” said Mike Larson, real estate analyst with Weiss Research. “For the troubled borrower, you really have to look at some other avenues,” including modifying their existing mortgage with their current lender.

Rates react to supply, demand and risk associated with certain securities. Mortgage rates have hovered stubbornly around 6 percent for months.

With this week’s announcement to buy $600 billion in mortgage-related securities, the Fed became the 800-pound gorilla in the market. The Fed’s demand for securities will drive prices higher, and yields and (with luck) interest rates lower.

“If these rates hold, you’ll see these refinance applications really start to take off next week,” said Marc Savitt, president of the National Association of Mortgage Brokers.

Already, some homeowners were lining up Wednesday.

Brenda Pittsnogle and her husband are combining their first and second mortgages, with rates of 5.875 and 6.5, in a refinancing deal at 5.375 percent. That will save the couple $170 a month.

Meanwhile, home buyers who have been waiting patiently at the starting line may be enticed to take the Fed’s action as a starter’s gun. Lower rates and falling prices make the market more attractive for qualified buyers.