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Every cloud has a silver lining.  The real estate and Mortgage crisis continue to rain down on us, and the overall economy is still presenting unprecedented challenges.  The silver lining, however, is that Freddie Mac says mortgage rates have finally hit bottom.  As a result, homeowners are seizing the opportunity to refinance in record numbers.

Nationwide mortgage rates are hitting bottom, according to Freddie Mac, the agency that handles about 20 to 25 percent of America's home loans. That phenomenon is inspiring people to take out loans to buy new homes. It's also causing a big spike in 
mortgage refinance activity, as homeowners try to capture more manageable monthly payments at lower interest rates. 



Freddie Mac CEO John Koskinen, who's serving as the interim agency director following the government takeover of Freddie Mac last year, announced that there's finally a floor under mortgage rates. As he emerged from a meeting with President Obama and executives of many of the nation's biggest financial services institutions, Koskinen told reporters that, if rates do go down further, the drop will likely be incremental. Without any dramatic cuts in rates in the near future, and with banks gradually loosening their purse strings to extend credit again, many consumers have decided to get off the fence and apply for a loan or mortgage refinance.

Affordable home prices

At the same time, home prices have fallen about 30 percent from their 2006 highs, according to a recent report from the Standard & Poor's/Case-Shiller real estate index. That may be terribly disappointing news as far as home equity is concerned, because price deterioration has effectively erased trillions of dollars of potential value from the housing market, along with much of the net worth of millions of American homeowners. But the good news is that economic storm cloud is that lower prices make houses less expensive to purchase.

The National Association of Realtors (NAR) is taking a positive view of the future of the housing market for that reason, citing evidence from a recent survey that housing affordability hit a new high in February. Breaking all NAR records for home affordability since 1971, today's prices are definitely reason to celebrate for anybody shopping for a house.

Mortgage refinances rising

Freddie Mac also said that average mortgage rates are now below 5 percent-the lowest since 1971. Typical rates, including those for mortgage refinances, now hover about a full point cheaper than they were a year ago.  Even "points" paid on mortgages are getting less expensive. Those fees had been rising steadily as banks tightened standards and passed costs along to borrowers in order to strengthen their weak balance sheets. But the Fed has made a concerted effort to intervene and thaw the credit markets. That strategy appears to be having a positive impact, reflected in the fact that Fannie Mac saw its mortgage refinance volume between February and March nearly double .