When mortgage interest rates fall below 9 percent, as they have in recent weeks, you can't count on them staying that low for long.
The last time such rates were widely available was about this same time of year in 1987. You could get a 30-year fixed-rate mortgage for 8.5 percent in some parts of the country.But those rates were available for only a few weeks. After a month or so, they began to rise rapidly - more than three-quarters of a percentage point in just one week in April - and by mid-May 1987, the 30-year fixed rate was being offered for an average rate of 10.6 percent.
The same thing is likely to happen this year, though perhaps rates won't rise as fast or as far.
"There are increasing indications that interest rates are now at bottom," said Paul Havemann of HSH Associates, a mortgage information service. "Certainly, consumers who want to buy a house or refinance should take this as a warning that they should not wait much longer."
That doesn't mean you should rush out and buy a house or refinance a mortgage just because rates are low. But if you've been planning to take such a step and simply haven't gotten around to it, you should move fast.
Right now, you can still find mortgages for less than 9 percent in some parts of the country, but you may have to pay four or five points to get them, which makes the mortgages much less attractive.
Those who want to refinance may find that rates above 9 percent aren't good enough to make the high cost of a new mortgage worthwhile.
For example, monthly principal and interest payments on a 30-year fixed-rate $100,000 mortgage with interest of 8.75 would be $787, but that payment would rise to $841 with an interest rate of 9.5 percent - a difference of $54 a month or $648 a year.
If you're sure you want to buy or refinance and can find an interest rate that suits your budget, it probably would be a good idea to "lock it in."
Most lenders will guarantee a rate for 60 days or so once you have applied for a mortgage. Then all you need to do is make sure there are no delays in the paperwork that would take you beyond the lock-in period.
When mortgage costs began to rise in the spring of 1987, many homebuyers ended up paying higher rates. Some had locked in rates but found their loans took longer than 60 days to process. They charged that lenders had deliberately dragged their feet to get out of the low interest rate commitments. Lenders claimed they were just overwhelmed with business because of the low rates.
There's no sign of such shenanigans this year. But if you have a low interest rate locked in, pay close attention to your mortgage as it's being processed. Many lenders are already quite busy handling refinancings.