Finance Bright Spot: Mortgage Rates

The U.S. finance, real estate and mortgage industries appear to be on a continuous loop of bad news. Lehman Brothers'(LEH) bankruptcy filing is just the latest. There will be more to come.

Amid the turmoil, rates for home loans posted their biggest decline in more than a decade, a drop of more than 40 basis points, or 0.42 percentage points.

That news should cheer homebuyers with excellent credit who haven't locked in rates. Last week's rate change is big enough to make a real difference in monthly payments. Rates on a 30-year fixed-rate mortgages averaged 5.93% with 0.7 point at the end of last week, down from 6.35% and 0.7 point a week earlier. On a $200,000 mortgage, that translates to a $54 difference in monthly principal and interest payments for the least-risky homebuyers.

You may be tempted to wait and see if rates fall further. Your decision should depend on how much of a risk-taker you are. Remember, it's difficult to predict the bottom of the market. So if the current rate fits into your budget, count yourself lucky and lock it in.

The government's takeover of Fannie Mae and Freddie Mac won't necessarily change the fate of consumers struggling to qualify for a mortgage. That's because, through Fannie and Freddie, the federal government now acts as the main source of money for mortgage lenders. Because the feds aren't in the business of taking on risk, expect lenders' standards to remain high.

Banks began raising standards for mortgages when it became clear that questionable lending practices put the entire industry in jeopardy.

Lenders instituted stronger requirements for documenting income, limited the availability of zero-down-payment loans and discontinued some nontraditional mortgage instruments. As always, they also reserved the best mortgage rates for the most creditworthy customers. The only difference is that the bar just got a little higher.