On Tuesday, interest rates dropped to their lowest point since the early 1960s. In an effort to shock the sluggish economy out of its slumber, the Federal Reserve cut the federal funds rate from 1 percent to a target range of zero to 0.25 percent. Many homeowners, especially those facing imminent foreclosure are rushing to refinance with at these basement bargain interest rates.With the new rates, homeowners can now find a 30-year, fixed mortgage rate at about 5.06 percent.
This is great news for homeowners who are in toxic loans and who want to find a more affordable rate for their mortgage. But unfortunately it may not help homeowners already experience foreclosure because many creditors are still only lending to debtors with stellar credit records.
If a homeowner is already facing foreclosure, their credit score has probably taken a serious beating. Missing mortgage payments and other debt obligations will bring down your credit score and scare many lenders away in today's cautious lending environment. But for those homeowners who are not facing foreclosure and have remained current with debt payments, taking advantage of these new, low rates may be the best long-term financial decision they could make.