UPDATE: Toll Bros Offering 30-Year Fixed 3.99% Mortgage
January 21 2009 - 6:09PM
Dow Jones News
Looking to jolt paralyzed buyers into action, builder Toll
Brothers (TOL) is offering a 3.99% fixed mortgage rate for 30
years, one of the lowest available.
The Horsham, Pa., company said the deal is for loans $417,000 or
less and carries no points for the buyer.
"We think we're going to create some excitement in the
marketplace," said Don Salmon, president and chief executive of TBI
Mortgage Co., Toll's mortgage subsidiary.
The deal started this week, so it's too early to gauge customer
reaction. But the industry is intrigued.
"Wow! What do I have to say other than 'Wow?' That's pretty
spectacular," said Richard E. Peek Jr., vice president of the
Florida Association of Mortgage Brokers. "It's an extremely strong
offer on a new home purchase at this point."
While Toll's average prices top $600,000, the company said
plenty of buyers can tap the special, which doesn't have a set end
date, because the average customer puts 30% down. Last year, 70% of
the loans TBI originated were below $417,000.
And, executives add, many of its first-time buyer communities
carry price tags under $500,000.
Toll didn't reveal its funding source, but said the lenders
support the rock-bottom rate, which requires a credit score of 720
or higher and a down payment of 20% without private mortgage
insurance.
Rates have plunged as the housing and financial crisis deepens.
For the week ended Jan. 15, the 30-year fixed-rate mortgage slipped
to an average 4.96% with an average .7 point, according to Freddie
Mac (FRE).
The rate, which has fallen for 11 consecutive weeks and was
5.69% a year ago, is the lowest since Freddie Mac began its survey
in 1971.
Several builders report the falling rates are spurring buying
traffic, though it is unclear if that's generating any sales. In
addition to falling prices and competition from mounting
foreclosures, the elevated unemployment rate is hurting builders
and scaring buyers.
"We think there's pent-up demand and buyers are on the
sidelines, and they need some sort of catalyst to bring them into
the market," said Frederick N. Cooper, Toll's senior vice
president, finance and investor relations. "We're hoping this will
be one such catalyst."
The Dow Jones US Home Construction Index, down nearly 30% in the
last year, has fallen more than 9% so far this year. Toll has
gained nearly 6% in the last year, but has fallen nearly 14.75%
this year.
On Wednesday, it closed at $18.27, up 3.28%.
-By Dawn Wotapka, Dow Jones Newswires; 201-938-5248;
dawn.wotapka@dowjones.com
(Kelly Nolan contributed to this story.)
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