4.5% mortgage rates

Reporting from Washington -- Could a 4.5% mortgage be your personal piece of the bailout pie?

Apparently many consumers thought precisely that the week after hearing that the Treasury Department was working on plans to slash loan rates for consumers who buy houses in the coming months.


The news threw a wrench into the marketplace -- making some shoppers reluctant to commit to purchase without guaranteed access to 4.5% mortgage money. In some cases, it stalled deals that were ready to go.

"It put us into limbo," said Dennis Badagliacco, chief executive of Altera Real Estate, a brokerage firm in San Jose. "Once [news] leaked out, it immediately slowed down" the pace of sales contracts and discussions, he said -- an ironic side effect of a plan ultimately meant to stimulate real estate transactions.

Customers didn't want to gamble that they'd be locked into a 5.5% mortgage when 4.5% financing might be readily available if they simply waited a week or two, Badagliacco said.


Another irony of the situation: The National Assn. of Realtors, of which Badagliacco is a director, was the primary force behind the concept of federal intervention to lower rates by a full percentage point. Representatives of the association brought the proposal to federal officials as part of a multipoint plan to kick-start the economy through housing.

The Federal Reserve has already formally adopted one of the group's recommendations -- committing to buy $500 billion in mortgage securities to inject liquidity into a market burdened by investors' fears, and to buy $100 billion in debt issued by Fannie Mae and Freddie Mac. Those moves knocked 30-year mortgage rates down by half a percentage point within a day, from 6% to 5.5%.

But setting up a program in which the government would buy securities backed by loans originated by private lenders at 4.5% would take longer to implement.

So what do you do if you're already well along in your shopping, you've found a house at a great price and you're ready to apply for a mortgage at 5.5%, but don't want to miss out on potentially lower rates?

Ask your broker or loan officer whether you can lock in today's rate but still have the ability to move down should cheaper money become available. Not all lenders can accommodate such requests, but some brokers offer 60-day locks with that option. Others may charge you.

Either way, you're better prepared for your own little bailout -- just in case it comes your way -- without having to risk losing the house you really want.