I just looked at some mortgage charts, data going back to August, 1998. I did this because the "Refinance Activity Index" maintained by the Mortgage Bankers Association reached its second-highest level ever. My thought was not "oh wow" but rather "oh when" did we see the highest level of refinance applications. It was weird. The date turned out to be October 9, 1998. Almost to the day three years ago, we saw a similar volume.

For those with a little dust on their memory shelves, Federal Reserve Chairman Greenspan served up an impromptu rate intervention to help stave an Asian financial collapse in October 1998. Rates had already been heading downward because of financial instability, but the Fed cuts helped spur a sharp drop in mortgage rates. For about five days.

After that, rates took off and never looked back, reaching a peak almost 18 months later, when rates moved above the 8.50 percent mark.

So what are all these numbers besides a coincidence? They could mark the bottom of perhaps the lowest fixed rates we've seen since keeping track.

No one, and I mean no one, knows where rates are headed. Some may think they have a pretty good idea based upon technical factors or consumer sentiment, but there are simply too many intangibles that impact long-term rates.

If you're now thinking about locking in, think about it this way...assume you'll decide but make the wrong decision. In other words, if you decide to lock today yet rates go down another 1/4 percent in 60 days you still really won, didn't you?

No, you may not have hit the absolute bottom, but at least you got a record-setter. On the other hand, let's say you didn't lock and made a mistake...rates shot up and never went back down. Which way would you rather be wrong?

What this means is obvious for one reason, and less obvious for another. It's obvious that if you've been waiting for interest rates to fall before refinancing, you should really consider locking-in with your lender. I know, I know, I don't have any crystal ball here I'm just saying that if you locked now, even if you made a mistake it wouldn't be a big one. Prudence can be king.

Another, less sexy reason is for qualification purposes. Again, by looking back just over a year ago, fixed rates were almost 2 percent higher than they are today. That means plenty for those trying to get into their first home. Why? Think: Debt ratios.

Say you wanted to buy your first home but the price was a little out of reach, around $150,000. To qualify for that home using fixed rates from a year ago you would have to make about $3,600 each month under most programs. Yet if you only made $3,100 then you probably wouldn't qualify based upon debt ratios. But with today's rates you could. That's like giving yourself a 14 percent pay raise in one year.

Put another way, if you made $3,100 last year you would qualify for a $122,000 home loan with 5 percent down. Today, that same income will get you a $150,000 house.

That's the influence lower rates can have that is sometimes overlooked. Yeah, if you own a home and want to lock in a good long term rate, "refinance mania" is certainly getting all the good press. But the real hero may indeed be the increased buying power these rates have, and if you were turned down just a few months ago for your dream home, try again, lower rates just might get you in the door.

For more articles by David Reed, please press here.

Published: October 19, 2001

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, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can't Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, is a former columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.