The U.S. jobless rate fell to 7.7 percent last month, the lowest in four years, according to the Bureau of Labor Statistics. The rate hasn’t dipped below 7 percent since November 2008. The central bank said on Dec. 12 for the first time that rates will stay low “at least as long” as the jobless rate remains above 6.5 percent and Fed economists project inflation of no more than 2.5 percent one or two years in the future.
“The losers in monetary policy are the savers,” Rupkey said. “Their rates are at zero for four years with the promise of two-and-a-half more years of zero rates. There’s little hope for the savers out there.”
Mortgage borrowers, on the other hand, have never had it better. Bob Miller, who bought a 2,100-square-foot condo in Greenwich, Connecticut, in September for $680,000, got a 3.5 percent rate on his mortgage. After a 20 percent down payment and not counting taxes and maintenance fees, his monthly bill would be $2,443. At the 18.25 percent rate he paid for his first house 30 years ago, payments would have been $8,309.
Super Bowl
The difference helped Miller, 57, and his wife, now empty- nesters, pay for re-carpeting and painting their new place, which overlooks a pond where they plan to take their 3-year-old granddaughter to feed the ducks. Miller is also in the market for a big-screen, high-definition television.
“I’m going to watch my New York Giants repeat as Super Bowl champions and then I’ll watch the Yankees in the summer,” said Miller, who leases commercial space for a living.
The Fed’s rate pushed 30-year mortgage-borrowing costs to 3.31 percent last month, the lowest in history, according to Freddie Mac, the government mortgage buyer. At the same time, U.S. home prices have risen 7 percent so far this year after losing 35 percent from their July 2006 peak, according to the S&P Case-Shiller Home Price Index.
Low rates have sparked a boom of home-loan refinancings. The Mortgage Bankers Association expects $1.7 trillion of mortgages to be written this year, the most since 2009. About 71 percent will be refinancings, the group says, up from 46 percent in 2008.
Seven-Year Wait
Not everyone can take advantage. Damian Bertain is one of the 4 million Americans who went through foreclosure in the last 3½ years, according to RealtyTrac Inc. Bertain, a broadband technician who works out of Suddenlink Communications’s Eureka, California, office, quit paying his mortgage, lost his home and filed for bankruptcy after a divorce from his wife of 12 years that was finalized earlier this year. He was forced, at the age of 39, with joint custody of three children, to live with his parents.