Loan rates are down: The bad and the good

The cost of borrowing is heading lower.

Take mortgage rates. According to Bankrate.com, the national average for 30-year fixed rate mortgages is 4.37%. That's down from 4.52% last week. The 15-year mortgage is 2.87%, well below last week's 3% rate.

Normally, we cheer when interest rates come down, at least if we're in the market to borrow money. The news is mixed this time. Sure, falling mortgage rates are a boon to homebuyers.

Problem is, declining mortgage rates also reflect a depressed housing market and an economy that's stalling out. (And just because rates are down isn't a good reason to borrow.) The rate drop is a signal that the economy is back in trouble.

When it comes to student loans a decline in rates is for the best. Borrowers come out ahead.

For instance, the rate on federal Stafford (for students) loans reset every July 1 for loans issued between July,1998 and June, 2006. The rate for these loans in repayment is now 2.36%, down from 2.47%. The rate is 1.76% if the student is in school, grace period, or deferment. It was 1.87%.

At least some student borrowers are getting financial relief.

This table from Finaid offers an updated list on Stafford and Plus (for parents) loan rates.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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