Tony Jabon had an e-mail in to his mortgage broker by 10 a.m.
The 35-year-old environmental consultant in Charlotte, N.C., had heard about the Federal Reserve's decision to cut its key interest rate to nearly zero and wanted to refinance to something lower than 5.5 percent.
Within hours, he had locked in a rate of about 4.6 percent. He'll save about $160 on his monthly payment. "Any time you can save a dollar," he said, "why not?"
Homeowners across the country did the same Wednesday. Mortgage brokers reported a surge of calls from borrowers seeking to take advantage of the Fed's extraordinary decision. Some brokers were quoting mortgage rates of close to 4.5 percent for people with strong credit and hefty down payments.
The national average rate on 30-year, fixed mortgages was 5.06 percent on Wednesday, according to financial publisher HSH Associates — the lowest since the 1960s and down from 5.3 percent Tuesday.
"This is beautiful, oh my gosh!" said Patti Mazzara, a mortgage broker in the Minneapolis suburb of Edina, who was surprised when she looked up rates and found them well below 5 percent, down at least three-quarters of a percentage point from earlier in the week. "This is a whole new game now. Hopefully it's going to give people some relief."
The Fed, aiming to free up lending and jolt the economy back to life, cut the federal funds rate Tuesday from 1 percent to a target range of zero to 0.25 percent and pledged to keep funneling money into the market for mortgage investments.
It was the best news in months for anyone looking to lock in a 30-year, fixed-rate mortgage. But it was not expected to be a cure-all, and borrowers already in danger of foreclosure probably won't be able to take advantage.
"It's a call to action for homeowners looking to get out of adjustable-rate mortgages," said Greg McBride, senior financial analyst at Bankrate.com. "Unfortunately, it's not an equal-opportunity party."
Even Wall Street, which pushed the Dow industrials up 360 points after the Fed announcement Tuesday, tempered its enthusiasm on Wednesday. The Dow finished down about 100 points.
An estimated 12 million Americans owe more on their home loans than their houses' current value, unemployment is still rising quickly, and foreclosures are soaring.
For people whose home values have plunged, "I could have a 1 percent interest rate, but it wouldn't help them," said Michael Maynard, a mortgage broker in Branford, Conn.
"People losing their homes aren't losing their homes because they can't get a 6 percent mortgage," Maynard said. "They're not qualifying at all."
In Charlotte, Jabon's mortgage broker, Will Mullinix, said that while rates that low are "pretty unprecedented," the best deals are available only to borrowers with pristine credit who are taking out loans for under 80 percent of their house's current value.
"All the stars have to align," Mullinix said.
And economists expect falling rates to provide only a modest boost to home sales, especially as unemployment worsens amid what could be the longest economic downturn since the Great Depression.
"People tend to be more inclined to buy a house when they're confident about their employment and income prospects," said Wachovia Corp. economist Mark Vitner.
Besides lowering the interest on fixed-rate mortgages, rates should come down on adjustable-rate home equity loans. Those are tied to the prime rate, and prime rates came down immediately after the Fed move Tuesday.
The Federal Reserve also plans to buy up mortgage debt and is considering buying long-term Treasury bonds that are closely tied to mortgage rates, so analysts expect rates to drop even further.
"We're going to see just a massive refinancing boom," said Mark Zandi, chief economist at Moody's Economy.com, who estimates that up to 10 million U.S. borrowers, or about one in five Americans with a mortgage, could wind up refinancing.
Senate Majority Leader Harry Reid said Wednesday that some of the $700 billion financial bailout should spent to aid borrowers in danger of losing their homes.
"We've given enough big checks to these banks. Let's do something to help foreclosures," he said in a conference call with reporters.
President-elect Barack Obama's advisers were weighing an economic recovery plan that could cost as much as $1 trillion over two years. The figure is far bigger than the $600 billion that Obama's team initially envisioned.
Mortgage applications rose about 3 percent last week, but are still below highs for the year reached in early February, the last time rates were attractive enough to cause refinancings to surge.
For homeowners who haven't been able to sell their houses, the lower rates represent an opportunity to at least save some money. And if they have enough equity in their homes, they can still pull out money to make improvements — albeit at a higher interest rate.
Lisa Wallwork, 37, and her husband, Shawn, are in the process of refinancing the mortgage on the house they've owned for five years in Tolland, Conn. They pulled it off the market in September after their house didn't sell for more than a year.
"We wanted to move up to a bigger and better house," she said.
Instead, the couple are refinancing their $185,000 mortgage, pulling out equity to remodel their kitchen and getting a new front door. And they still expect to save up to $300 a month in the process.
Associated Press Writers Joshua Freed, Christopher S. Rugaber, Stephen Singer and Erica Werner contributed to this report.
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