The stock market turmoil of May 6 and the Greek bailout may have a positive side effect for US home buyers and homeowners … that side effect is lower mortgage rates. The upheaval in the markets led investors on a “flight to quality” as dollars flowed into Treasury bonds forcing yields higher and corresponding rates lower. The question becomes whether the market’s moves will be sustained, leading mortgage rates to remain lower or whether time settles investors’ nerves and mortgage lenders are reluctant to drop rates.

Historically, bond market rallies have led borrowers to flood the financial institutions looking to refinance their mortgages. This time, it appears that lenders are reluctant to move quickly to drop mortgage rates (http://www.americanbanker.com/issues/175_88/mortgage-refi-surge-1018849-1.html). It also appears that another quarter-point or more of rate reduction is needed to push a large number of borrowers into the refinancing pool.

Those already looking to refinance – me among them – are facing tighter underwriting and appraisal guidelines. In addition, the massive reduction in home values most of us have experienced over the past 2-3 years have left little equity in the home making refinancing an existing mortgage difficult at best.

The Federal Home Loan Mortgage Corporation or “Freddie Mac” announced that the average rate on a conforming 30-year mortgage stood at 5% on May 7, 2010. This is down 6 basis points (0.06) from a week earlier. The rate, however, is still higher than the 4.84% average a year ago.