If you're a serious home shopper or about to refinance, consider locking in a mortage interest rate -- now.

Rates could be scraping the bottom.

Lenders often lower consumer rates in anticipation of the Federal Reserve lowering benchmark rates and they may have already gone too far.

Even if room remains for yet lower rates, cuts may not be deep or long enough to risk floating with the market instead of locking in at today's relatively low rates -- 6.78 percent for 30-year mortgages on Jan. 23, according to BankRate.com.

Along with the economy, mortgage rates have been sliding since last spring.

The Federal Reserve justified lenders' mortgage rate reductions in a surprise move on Jan. 3 when it lowered the Fed Funds rate, the rate banks use for overnight loans, from 6.5 percent to 6 percent. The same day the Fed also cut the Discount Rate, the Fed's rate on loans to banks, from 6 percent to 5.75 percent.

With the fed cuts, lenders sliced still more off the cost of home buying and refinancing as they speculated on similar, even deeper cuts at the Fed's next scheduled policy meeting Jan. 30-31.

After all, a growing number of reports were pointing to a recession, albeit a short, shallow one -- with lower prices and fewer sales forecast for the real estate market.

Since then, however, major Wall Street indexes have shown improvements and last week interest rates suddenly rebounded, bubbling up to 7.18, before simmering back down below 7 percent, according to Bankrate.com.

This week, Bankrate.com's Rate Trend Index, a survey of mortgage experts forecasting mortgage rates, largely called for mortgage rates to fall, but the percentage of survey participants looking for rates to rise jumped to 23 from just 4 percent last week -- the greatest percentage of "up" voters in more than two months.

Meanwhile, half the 12-member Federal Open Market Committee -- the committee which directs federal monetary policy -- has been bullish on the economy, dismissing fears of recession.

For example, last week, William Poole, president of the St. Louis Federal Reserve Bank said "Growth prospects remain excellent. The inflation outlook for the next couple of years and long-term inflation expectations remain low."

And as economic forecasters were loading up on doom and gloom, Jack Guynn, president of the Atlanta Fed was putting it into perspective at a Jan. 8 meeting of the Downtown Atlanta Rotary.

"Two years ago..I warned of..."institutionalization of unrealistic expectations"...Let me again offer this reminder: slower GDP growth is not the same thing as no growth; a slightly higher unemployment rate is not the same thing as high unemployment; and a very modest uptick in measured inflation does not signal a return to accelerating inflation," Guynn said.

More recently, those beliefs were mirrored in the Fed's Beige Book, a survey of economic conditions, which reported December's slow down as little more.

Now, instead of the expected half point decrease in benchmark rates next week, the Fed likely will only punch rates down another quarter notch, forcing lenders to retreat.

"Rates will most likely go up since 'the street' felt Greenspan would decrease rates by one half and now they are predicting only one fourth. The problem is, the market already built the one half drop into the market," says Rob McCarthy, a mortgage planner with 101Loan.com.

For more articles by Broderick Perkins, please press here.

For more articles by Broderick Perkins, please press here.

Published: January 25, 2001

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.