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Mortgage-seekers may benefit most

Wed., Jan. 23, 2008

The turmoil on Wall Street and efforts to respond on Pennsylvania Avenue should improve prospects for consumers on Spokane Falls Boulevard, local officials said Tuesday.

The three-quarter percent cut in interest rates announced by the Federal Reserve Bank could substantially lower mortgage rates. The stimulus package, depending on what’s inside, could slip new buying power into consumer wallets.

Savers, on the other hand, could be looking at skimpy returns as certificates of deposit and similar investments mature over the next few months.

Craig Hart, president of Hart Capital Management Inc., said he does not think much of the stimulus ideas kicking around Washington, D.C., but he expects better things for the mortgage market.

The Internal Revenue Service mailed $300 checks to individuals and $600 to couples in 2001, when the economy was in a quasi-recession, he noted. “It did not do an ounce of good,” Hart said.

But broad tax reform coupled with aggressive interest rate cuts by the Fed helped spur the economic expansion that continued well into 2007, he said.

The $800 per taxpayer suggested by the White House will do little by itself to steady the economy, he said. “The stimulus package looks like a Band-Aid on a patient who is bleeding profusely.”

At a tax-preparation clinic opened for the first time this year at the Numerica Credit Union office at 301 N. Havana St., organizer Stephanie Blumhagen put the benefit of a potential $800 tax rebate in perspective. The earned income tax credits that many clients qualify for returned anywhere from $428 to $4,716 last year, depending on income and household.

The news for consumers looking for a new mortgage could not be much better. Hart said rates on 30-year mortgages typically run about 1 percent to 1.5 percent above the interest rate on 10-year Treasury bonds. Tuesday, those securities traded at prices that convert to a rate slightly less than 4 percent, so 30-year mortgages should continue moving to a rate near 5 percent, he said. Rates last week had dropped to 5.7 percent.

A homeowner with a $200,000 mortgage at 5.70 percent, for example, would pay about $90 per month less if the rate fell to 5 percent.

At AmericanWest Bank, President Robert Daugherty said he has already seen some 15-year mortgages offered with adjustable rates in the mid-4 percent range. Homeowners with good credit may be able to refinance 6 percent-plus mortgages at rates as much as 1.5 percent lower than what they pay now, he said.

But once-popular 30-year adjustable-rate mortgages have all but disappeared, he said. Nationally, rate adjustments are forcing many of those buyers into foreclosure.

Experts quoted by the Associated Press said the rate cut may be a lifeline for those who can qualify for refinancing. But they add the opportunity may be short-lived if the Fed action does what economists hope it will do; steer the nation away from recession.

Inland Northwest Bank Executive Vice President Chris Jurey said borrowers will benefit from the Fed move, but not by a full three-quarters percent. Savers, like those holding $100 million in INB CDs, face a less-happy future as those instruments reset with lower returns.

For the mostly conservatively managed regional banks in the area, Jurey added, the Fed cut will have only a short-term effect on performance.

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