The Wall Street Journal is reporting that The Federal Reserve's attempt to stabilize the housing market set off a chain reaction across the U.S. on Tuesday, dropping interest rates and quickly spurring a burst of refinancing activity by borrowers eager to lower their mortgage costs. Some brokers said it was the most activity they've seen in at least one year, although there was no way to determine the volume of refinancing.
Rates on 30-year fixed-rate mortgages dropped by roughly half a percentage point to about 5.5%, for borrowers with good credit scores and substantial equity in their homes, say mortgage brokers and lenders.
While the initial flurry of calls came from people seeking to refinance, economists predicted lower rates also will spur some home buying among bargain-seekers. The surge in refinancing will help the overall economy by putting more cash in consumers' pockets and reducing the pressure on some borrowers struggling to make payments.
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