Good Credit Equates to Low Interest Rates
Lenders Rewarding Borrowers with Low Mortgage Rates for Good Credit Scores
Most consumers in the digital age understand that credit scores play a significant role in mortgages, home loans and refinancing. Getting approved for the best home loan rate often is driven by the average of your three credit scores. Trans Union, Experian and Equifax are the three main credit repositories that best mortgage lenders use for underwriting home loans in the United States.
Mortgage Lenders Still Basing Loans on FICO Scores
It’s no secret that loan companies offer the best fixed mortgage rates to applicants that have high fico scores. The most common scores are based on models established by Minneapolis-based FICO, formerly known as Fair Isaac Corp., which are used to gauge a consumer’s financial health. The numbers, which range from 300 to 850, affect the ability to get mortgages and credit cards, as well as the rates borrowers pay for them. The score is used by 90 of the 100 largest U.S. financial institutions, according to FICO’s website.
About 18 % of 200 million consumers in the U.S. with credit scores, or 36 million Americans, had credit scores of 800 or higher in 2011, according to estimates from FICO. More than 75 million had scores of at least 750 while the median credit score last year was about 711, FICO said.
Good Credit Opens Up Doors
According to Freddie Mac the average 30-year mortgage rates that were tied to a fixed term came in at 3.89% this week. According to the Federal Reserve the average interest rate charged on credit card balances was 12.8 % in the 4th quarter of 2011.
Maximize Your Financing Opportunities
A credit score of 760 or higher on a $300,000 fixed thirty-year home loan may qualify a borrower for a 3.625% rate or $1,368 monthly payment, compared with a 3.85 % rate and monthly payment of $1,406 for those with scores from 700 to 759, according to myFICO.com. Having a credit score of at least 720 typically translates to the best mortgage rates available. In many cases, when a borrower has a credit score that exceeds 720 it enables lenders to be more aggressive with loan to value and debt to income ratios used to qualify home mortgage loans.
Home Values in Many US Cities Declining
Financing a home may be a good idea as home prices have fallen to 10-year lows around the country. Home prices in the nation’s largest cities fell in October for the second straight month, suggesting that prices will head down further next year and dashing hopes that the sluggish housing market was headed for an upturn. The Standard & Poor’s/Case-Shiller index, a measure closely followed by economists, showed price drops in 19 of 20 cities since September. Overall, the price index slipped 1.2% month over month and fell 3.4% compared with October 2010.
Low Mortgage Interest Rates Make Financing Very Attractive
The decline is typical of the season, when home buyers back off after the busy summer period. But coming off five straight months of increases through August, the retreating prices in the fall suggest that weakness in the market may stretch into 2012. Home purchase loans are becoming more accessable as lenders are opeing the lending parameters for first time home buyers. Bad credit home loan programs are not as available as they were in 2005 but FHA and VA still extend mortgages to borrowers with less than perfect credit.
In Los Angeles, the Case-Shiller index recorded a monthly decline of 1.5% in October after sliding 0.8% in September. Year over year, L.A. prices are down 4.9%, as measured by the index.
San Diego fell 0.6% from September and was down 4.5% from October 2010. In San Francisco the pattern was almost the same, with the price index off 0.7% from September and down 4.7% from a year earlier. “In the October data, the only good news is some improvement in the annual rates of change in home prices,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s. In 14 of the 20 cities tracked, the rate of the annual decline in home prices slowed.
More than 6 million homeowners (12.6% of the homeowners with mortgages) were either delinquent on their payments or in foreclosure at the end of the third quarter, the Mortgage Bankers Assn. said. About 22% of residential properties with mortgages were underwater at the end of the third quarter, meaning that the homeowners owed more on their loans than the properties were worth, according to CoreLogic data. “Add to this the currently high unemployment and underemployment rates, one gets a recipe for further price declines,” Newport said in a research note. “Our view is that foreclosures, excess supply and weak demand will drive prices down another 5% to 10%.” Should the economy slip into a recession, the unemployment rate will climb, driving foreclosures up and leading to an even larger drop in home prices, Newport said. He rated the chance of another recession a 35% probability.
Home sales in California were up 4% in November compared with the same month a year earlier, though they fell 4.2% from October, according to real estate research firm DataQuick. The median home price in the state in November was $244,000, down 4.3% from a year earlier but up 1.7% from October, the report found Read the original LATimes article online here.
Rates Rise Slightly for Refinancing and Home Buying
Home loan and mortgage refinance rates rose slightly last week and many lenders are hopeful that rates will see a positive bounce in the weeks to come. Interest rates rose slightly, with the average rate on 30-year fixed-rate mortgages climbing for a fourth straight week, according to Freddie Mac’s weekly survey of mortgage rates. The 30-year fixed-rate loan averaged 4.91% in the week ended Thursday, up slightly from the prior week’s 4.87% but down from 5.07% a year earlier. Mortgage rates generally track U.S. bond yields, which move inversely to Treasury prices. Mortgage rates have climbed this year after slumping most of last year when prices rallied on economic uncertainty.
The FHA rates remain as low as conventional rates. The VA rates dipped below conventional rates this week on 30-year fixed rate terms.
15-year rates for fixed-rate home loans averaged 4.13% in the latest week, up from 4.1% in the previous week but down from 4.4% a year earlier.
Five-year Treasury-indexed hybrid adjustable-rate mortgages were 3.78%, up from the prior week’s 3.72% but down from 4.08% a year earlier. One-year Treasury-indexed ARMs were 3.25%, up from 3.22% but down from 4.13%, respectively.
To obtain the rates, the 15-year fixed-rate mortgages required payment of an average 0.7 point and the others required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest
Mortgage Interest Rates Going Higher?
In the latest mortgage lead report, the Lead Planet indicated that mortgage applications rose as home loan rates fell. The mortgage lead generation company publishes these reports as a snapshot of the lowest and average interest rates available within the Lead Planet network of loan companies. Read the entire article, Will Mortgage Rates Rise in 2011?
FHA Loan Outlook for 2011
Few would argue the impact the FHA loan programs have had on the mortgage market in the last four years. With FHA rates at record lows, it’s logical to think that FHA loan originations would increase in 2011. However, a recent report revealed that HUD is forecasting that the Federal Housing Administration will endorse $288.7 billion of single-family FHA loans in fiscal year 2011, a 9.4% decline from FY 2010, which ended September 30.
Low Rates and Mortgage Friendly Guidelines
Let’s be honest, low interest rates and mortgage friendly guidelines drive the housing market. Mortgage lenders and banks continue to ask borrowers for more loan documentation. The streamline refinance is the one exception for tighter guidelines. This unique refinance loan does not require income documentation and in some cases no appraisals.
Having record low mortgage rates with tight lending guidelines will not help the housing sector rebound. We have had record low rates for 3 straight years and the home sales remain sluggish. Historically low home loan rates are a crucial component of record affordability for home buyers, but lack of confidence in the market and fear of further price declines are challenges that are outweighing that factor, Credit Suisse analysts wrote Wednesday. Record low interest rates have dominated mortgage news for most of 2010.
Existing home sales were down in all 50 states in 3Q10, with double-digit year-over-year declines in 47 states, the result of weakened demand after the homebuyer tax credit. In new construction, housing starts in October were at a seasonally adjusted annual rate of 519,000, down 1.9% from the October 2009 rate and 11.7% below September’s rate, the Census Bureau and Department of Housing and Urban Development reported Wednesday.
Tips for Refinancing into the Lowest Home Mortgage Rates
By now most homeowners realize that a mortgage refinance may be the best way to increase cash flow and reduce housing expenses. Just when it looked as if mortgage rates couldn’t fall any further, they did. Mortgage interest rates on 30-year fixed home loans hit an average of 4.25% in September, the lowest level since 1953, according to Freddie Mac, and are still hovering below 4.5%. Jumbo mortgage rates fell to 5.125% which is the lowest level for jumbo rates in years. FHA mortgage rates fell to 4.125% in October which enabled thousands of borrowers to refinance their adjustable rate loans.
1. Maintain good credit scores. High ficos are needed to maximize the lowest possible rates.
2. Work with a trusted lender that offers competitive rates. Working with a shady lender offering lower rates will end up biting you.
3. Consider a variety of home loans in an effort to find a great rate mortgage that meets your needs.
15year interest rates are even more enticing at 3.75%. The most creditworthy borrowers may even find lower payments, with interest rates as much as quarter of a percentage point lower.
Credit Qulifications for Best Mortgage Refinance Rates
More than ever, credit has become the driving factor for borrowers to qualify for the best mortgage refinance rates. Good credit borrowers are finally being rewards with mortgage refinance rates at their lowest point in 50-years.
In today’s market, borrowers with high credit scores are eligible for conforming, jumbo and FHA rates below 4% with fixed rate mortgage refinancing terms. Qualifying for a low rate home refinance is no easy task as most mortgage lenders have significantly tightened their lending guidelines. With refinance rates this low, you can imagine that there is quite a frenzy of homeowners trying to lock into today’s record breaking rates. And unlike in late 2008, when rates started their plunge to historic lows, many home loan lenders say they are rushing to accommodate the influx in applications.
2010 the Summer of Records for Mortgage Rate Lows
It seemed like every week this summer the mortgage interest rate records were broken with new lows. Conforming, VA and FHA mortgage rates all glimmered at 40-year lows. But even as a glut of unsold inventory keeps the housing market from recovering, nearly a third of Americans can’t qualify for home mortgages, according to new data from online real estate search company Zillow.
Home Loan Rates Starting at 4.25%
Potenetial homeowners with credit scores below 620 points were largely unable to take out thirty-year home loans in the first half of September, even if they offered down payments as high as 25 %, Zillow found after analyzing more than 25,000 loan quotes and purchase requests on its website. A full 29.3% of Americans have a credit score that low, Zillow says, citing data from myFICO.
Mortgage interest rates, meanwhile, are at a levels not seen since Freddie Mac started recording interest rates in 1971. According to data compiled by the Federal Reserve the average mortgage rate on a thirty-year mortgage was 4.37% as of September 16th. The St. Louis Fed has data going back to 1971 and, in that period, before 2009, the interest rate never fallen below 5%.
These days, according to Zillow, the lowest home loan rates remain at 4.25%, available only to those with a credit score above 720 points about 47% of Americans. The higher rates, ranging from 4.44 to 4.9%, are available to about 23.8% of Americans. The remaining 29.3% of the United States cannot get approved for home mortgage loans at all.
A variety of factors, including a high volume of foreclosures and weak demand, have depressed the housing market to such an extent that some experts say it won’t rebound for three years. But mortgage lenders are understandably cautious. While easily accessible home loans might contribute to a housing recovery, lenders are still shell-shocked from the aftermath of the housing bubble. Banks have been writing off debt in record numbers, the charge-off rate this year has been higher than any year since at least 1988, according to data from the Saint Louis Fed.
Interest Rates on Mortgage Loans Decline Again
Once again, mortgage rates fall again and continued their streak of record breaking interest rates. The fixed 30-year loan fell to 4.55 percent and the 15 year declined to 3.91 percent. The Mortgage Bankers Association posted their weekly application survey and it shows that some folks are taking advantage of record-low mortgage rates.
The mortgage data report underlined the fact that most of the activity is coming from refinancing rather than home buying. The MBA survey showed a 4.5 percent increase in the overall number of home mortgage applications, and a 5.7 percent increase in the number of people who applied to refinance. So that means that mortgage refinancing represented 82 percent of all loan applications. It was notable that home equity credit line applications declined nearly 5 percent and fixed home equity rate loan application volume dropped over 2%.
Mortgage Interest Rates Hit Record Lows
Mortgage Interest Rates Hit Record Lows
Freddie Mac announced the lowest mortgage interest rates since 1971, yet the demand for new home loans remained weak. US mortgage loans did inch up last week but even with record low mortgage rates new homebuyers were not impressed. Lending companies have been taken back by the lack of interest from loan applicants. Mortgage industry insiders insist that the unemployment and tighter home loan guidelines are driving away the growth of homeownership. .
Home purchase and mortgage refinancing applications rose by less than 1% in the first week of August, even as 30-year mortgage interest rates fell to 4.57%, the lowest in 20 years of record keeping by the Mortgage Bankers Association.
Wall Street Pushing for Home Refinancing Boom
Mortgage rates for a 30-year fixed rate loan are now available at 4.375%, the lowest it has been since Freddie Mac began tracking mortgage interest rates in 1971. But A big reason has to do with the fact that falling housing prices have left many borrowers with little or no home equity, which is also known as being “underwater.” As a result, they can’t qualify for home refinancing. Others are deterred from refinancing by strict lending standards and the high fees that come with it.
To get more mortgage refinancing approved, some respected economists and analysts at firms like Morgan Stanley and Goldman Sachs say the government should encourage a refinancing wave by adjusting lending policies at Fannie and Freddie. The mortgage lenders were taken over by the government two years ago. They own or guarantee about half of all U.S. mortgage loans, or nearly 31 million home loans worth more than $5 trillion. They buy home loans from lending companies, package them into bonds with a guarantee against default and sell them to investors.
The savings from a major mortgage reset could be significant. Allow someone with a $200,000 mortgage at 6% to refinance down to 4.5%, and suddenly there is $3,000 a year available to be plunged back into the economy. Add that up across millions of people, and you have what Morgan Stanley economist David Greenlaw calls a “slam dunk stimulus.” The government is already trying to help borrowers refinance, but its existing programs have failed. The Home Affordable Refinance Program, or HARP, is directed a homeowners whose loans nearly or completely outsize the value of their homes. The government rolled out HARP in an effort to aid millions of loan refinances, but only a few hundred thousand have been done. The problem is that there are too many restrictions when trying to refinance under HARP. That’s why some people on Wall Street want the government to roll out a less restrictive program to get more mortgages resets done.
Regardless of the pressure coming from homeowners and some on Wall Street for the government to ease refinancing guidelines, Treasury Department spokesman Andrew Williams tells The Associated Press that “the administration is not considering a change in policy in this area.” The government sees where the pitfalls are. Taxpayers have already pumped $145 billion into Fannie and Freddie over this last two years, and widespread refinancing now could raise that burden. Fannie Mae and Freddie Mac would very likely see their earnings decline and write-downs on their home loan securities go up. In total, a giant mortgage reset could cost the home loan lenders $75 billion, according to research from investment firm Keefe, Bruyette & Woods. Let’s also consider that a refinancing boom could have unintended consequences. The reality is that the pace of home foreclosures might not slow. A lower interest rate still might not be attractive enough for borrowers with deeply underwater mortgages to stay in their homes. To some, it is not worth paying any money toward a depreciating asset, regardless of the interest rate.
New borrowers could also face higher mortgage rates. A large refinancing wave would depress the value of mortgage-backed securities, making them less attractive to investors such as pension funds and foreign governments. Weak demand for those securities could lead to higher mortgage rates because lenders could have a harder time selling off their loans to investors. A short-term home refinancing wave could help stabilize the housing market now, but it could also hurt home sales later. Homeowners who are able to lock in a once-in-a-lifetime interest rate could be deterred from moving in the future. Hitting the mortgage refinance button could put more money into homeowners’ pockets today, and would also give the economy a quick jolt. But the ultimate costs are too high.
Lowest Mortgage Rates Seen by Freddie Mac
Freddie Mac announced another record today for the lowest interest rates since they began recording mortgage interest rates in 1971. The 30-year fixed rate mortgage reported averages of 4.69% for the week ending June 24th. Fifteen-year fixed mortgage rates fell to a 4.13% average which was also slightly lower than the previous week. VA mortgage remain appealing to military vets because the record low VA rates are still available as well. If you already have a VA loan but need a lower interest rate, consider the VA streamline.
New and existing home sales showed declines in May, Nothaft pointed out. “Existing sales fell 2.2%, compared to the market consensus forecast of a 6% gain, based on figures published by the National Association of Realtors. Sales of new homes fell 32.7% to an annualized rate of 300,000 units, which was the largest monthly drop and slowest pace since records began in 1963, according to the Census Bureau,” he said. Read the original article > 30-Year Fixed Rate Home Loans and 5-year ARMs Fall to Record Low
Thirty Year Mortgage Rates Drop to 4.79%
Borrowers across the nation are lining up for home refinancing offers as mortgage interest rates drop once again. The current mortgage rates remain low as the 30-year fixed-rate mortgage average rose slightly to 4.79% with an average 0.8 point for the week ended June 3, according to the buyer of home mortgage loans. In the prior week, the average rate was 4.78%, the lowest since early December. The year-ago average for the thirty-year home loan stood at 5.29%. “The economy grew at a slower rate than originally reported in the first three months of the year … which suggests inflation will remain tame in the near term,” Freddie Mac chief economist Frank Nothaft said, referring to revised data on U.S. gross domestic product. See full story on first-quarter GDP revision pegging growth at 3.0% pace. “As a result, home loan rates held at historic levels this week,” he said in a statement. Underscoring this, interest rates on fifteen-year fixed-rate mortgages reached a new record low, averaging 4.2% — the lowest level since Freddie Mac began tracking the mortgage rates back in 1991 — down from 4.21% in the prior week.
One-year Treasury-indexed adjustable-rate mortgages averaged 3.95%, unchanged from the prior week, and the lowest level since May 2004. The 1-year ARM averaged 4.81% a year ago. The 5-year Treasury-indexed hybrid ARM averaged 3.94%, down from 3.97% in the prior week. A year ago, the 5-year ARM averaged 4.85%.
To obtain the rates, the 30-year fixed-rate mortgage required a payment of an average of 0.8 point. The other mortgages required a payment of an average 0.7 point. A point is 1% of the mortgage amount, charged as prepaid interest.
Suggestions for Fannie Mac Mortgage Reform
Regulatory reform in the mortgage industry is inevitable. The mortgage blogs have been buzzing this week with talks of Fannie Mae and Freddie Mac merging together in an effort to salvage these failing government companies that own 97% of all mortgage notes in America. Even with 30-year fixed rate mortgage programs below 5%, we can’t fix the mortgage mess simply by inducing another refinance boom.
The new Fannie Mac should no longer target low and moderate-income individuals since that replicates FHA’s function. On the path to economic independence, Congress should form a Resolution Trust Corporation type of entity to acquire the new Fannie Mac’s tainted assets. The RTC-type company would dispose of bad credit home loans and real estate acquired through foreclosure. The original RTC was established in 1989 to mop up the assets of failed savings and loan associations. The late Bill Seidman headed it up. He was previously chairman of the Federal Deposit Insurance Corporation under President George H.W. Bush. He adroitly disposed of billions of dollars of assets and returned the proceeds to the Treasury.
The new Fannie Mac will inherit a massive one-to-four unit, home-lending division. That is where most of the tainted assets are. It will also acquire the smaller, multifamily division. Its delinquencies and defaults are more manageable. The skills necessary to underwrite, securitize and service multifamily loans have little in common with mortgage lending. As a result, the new Fannie Mac should spin off the multifamily division into a new company. One company to dispose of tainted assets; another for home lending and a third to make multifamily loans is a rational approach to shrinking the GSEs and returning billions to the Treasury.
The Republican’s GSE amendment calls for repealing Freddie Mac’s and Fannie Mae’s affordable-housing mandate, requiring the companies to shrink their mortgage portfolios, lowering their loan limits and increasing down-payments for home loans. It is unrealistic for that to happen with the GSEs in their present form and while the economic recovery is weak. But the time is right to merge Fannie Mae and Freddie Mac and form three separate companies. That is the best way to lead the GSEs out of federal conservatorship and repay the taxpayers.
Home Mortgage Rates Hit 2010 Low
Mortgage rates fell last week as the turmoil in Europe sparked a flight to safety among investors. According to financial publisher HSH, mortgage interest rates ended at 5.01% last Friday, down from 5.15% at the beginning of the week. But there’s no guarantee that home loan rates will stay low because there’s so much volatility in the market right now. If the Euro rallies or we get good economic news in U.S. economy would surely raise interest rates almost as quickly as they declined. Keith Gumbinger of HSH said, “These things are fleeting.”
The Mortgage Bankers Association said that low rates caused a flurry of refinance activity, with applications up 15% from the previous week. But new home loan applications dropped by nearly 10%, a possible sign that the expiration of the home-buyer tax credit pulled some sales into April that might have occurred in May. Current VA mortgage rates were lower than anticipated and VA refinancing volumes rose sharply as a result. Conforming home mortgage rates ended last week just above record lows set in December. Surprisingly, rates have fallen below where they were at the end of March, when the Federal Reserve ended its purchase of $1.25 trillion in mortgage-backed securities. Most analysts had expected rates to move up after the Fed wound down its purchases.
Online Loan Shoppers See Lower Mortgage Rates
CBS News reported that the Greek debt crisis led to an unexpected drop in fixed mortgage rates. The Royal Bank, along with all of the other four big banks, dropped the popular five-year fixed closed mortgage 0.15 percentage points to 6.10% on Tuesday. Most banks also dropped the benchmark rate for their discounted five-year mortgage by a similar amount to 4.70%. Some online and smaller mortgage lenders offer no cost refinance loans. This is good news for online home loan shoppers who’ve experienced higher fixed mortgage rates that have risen over 1% in the last month. Many banks followed with reported lower mortgage rates for home buying in the US and Canada. Longer-term fixed interest mortgage rates typically follow longer-term bond yields. The Greek debt crisis put a stop to rising bond yields as traders moved money out of risky assets. “Both treasuries and Government of Canada bonds have recently benefited from lower mortgage interest rates in the Unites States.” Many mortgage loan experts say the lower interest rates are just temporary and note that bond yields are already edging higher as the EU’s bailout package eases Greek default concerns. Adjustable rate mortgage loans are tied to the overnight lending rate. That mortgage interest rate has been at a rock-bottom 0.25% for over a year.
Fed Reserve Raises Interest Rates
In subprime mortgage debacle and financial crisis, the Federal Reserve urged the national banks to step up to its discount window, pushing the banking industry to get over the stigma on borrowing from the government. When banks and finance companies stopped lending to each other overnight altogether in the fall of 2008, discount window for home mortgage loans became even more crucial. The Fed even narrowed the penalty banks paid for using discount window money, moving the discount rate closer to the Federal funds rate during the crisis.
Watch Video on the Fed Raising the Discount Rate
According to mortgage executive, Bryan Dornan, “Clearly, the Fed is signaling a change in direction for interest rates.” Dornan continued, “Now that the Fed is raising rates, expect mortgage rates to begin retreating upwards.” Now that the crisis has blown over, the Federal Reserve wants things to get back to normal. Late Thursday afternoon, it surprised the markets by raising the discount rate it charges though its emergency window to 0.75% from 0.50% while keeping its targeted Federal funds rate at between zero and 0.25%. The change will take effect on Friday. Meanwhile, the duration of the mortgage loans will revert to the normal overnight period from 30 days come mid-March. Though many thought the Fed was headed in this direction, most everyone thought it wouldn’t act until its next Open Market Committee meeting next month.
The Fed explained in a brief statement that it wants banks to return to the private debt markets. The increase “will encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve’s primary credit facility only as a backup source of funds.” The central bank added the move was not a signal it was tightening money nor a signal its outlook on the economy had changed. It is a further indication; however, that the government is pulling away from the extraordinary assistance it has given the financial markets over the last few years.
Later this spring the Fed is expected to stop buying bad credit mortgages and mortgage-backed securities, a move that is worrying those in the housing markets who had hoped for a smooth recovery. The government’s numerous bank industry lifelines have been criticized for allowing banks to make heaps of money by borrowing from the Fed at next to nothing and profiting from the spreads they can make by investing that cash in the Treasury markets. But the Fed also has to come up with an exit strategy for a balance sheet that has become bloated with Wall Street’s unwanted assets. Forcing banks back to the short-term debt markets for funding (or even to rely on their own deposit taking operations) is another baby step to getting the banks out of the emergency safety net.
Which Way Will Mortgage Rates Go?
Mortgage interest rates continue to hover around the 5% mark. Conforming, FHA and VA mortgage rates all continue to be reported in the low 5 percent range for home loans and mortgage refinancing. There have been positive signs in the last quarter regarding job losses, the financial markets and even the housing sector, but economic recovery is likely still a few months away, Freddie Mac’s chief economist said today. In an article titled, “Are We There Yet?” the outlook from Freddie Mac’s Frank E. Nothaft for 2010 is mostly positive, although there are cautionary flags ahead – particularly with higher mortgage interest rates and the expiration of homebuyer tax credits.
Most economists will be looking at the aftermath from the government’s winding down of its purchases of mortgage loan backed securities from Freddie Mac and Fannie Mae. By discontinuing its purchase program in April, the central bank is hoping that private buyers of mortgage-backed securities will return, and rates won’t rise much after that. Investors in mortgaged-backed securities have stayed mostly on the sidelines. “U.S. Department of the Treasury MBS purchases were completed by year-end, and Federal Reserve purchases of MBS and Freddie Mac and Fannie Mae debt are scheduled to terminate by the end of the first quarter 2010 – both potentially pose the risk of a rise in mortgage rates relative to benchmark yields,” Nothaft said.
Another potential strain on interest rates is the expiration of tax credits for home buyers. Under the federal program, home purchase contracts must be signed by April 30 to qualify for the tax credits. “The tax credits have likely caused some families to purchase a home earlier than they might have otherwise, thus moving sales forward in time and helping support the housing market. High affordability and improved buyer sentiment further bolster sales,” Nothaft wrote.
So when will we get there? “While there may be some bumps along the way, the transition into economic recovery appears to be underway as we head into 2010: real economic growth in the 3 to 3.5 percent range, a cessation of job losses in the first quarter, rising home sales, and a strengthening of housing starts in some markets,” Nothaft wrote “We should be ‘there’ in the next few months, if not already.” Read the original article online.
Mortgage Rates Inch Up
Mortgage interest rates continue to teeter the monumental 5% mark and the demand for mortgage refinancing continues to rise. One problem for most loan applicants is that they do not qualify because conventional and FHA mortgage guidelines have tightened to the point that only a small percentage of borrowers qualify for home refinancing or new home loans. The financial crisis and Great Recession have their roots in the housing bust. When it comes, a lasting recovery will be evident in a housing rebound. Unfortunately, housing appears to be weakening anew.
Housing figures released last week show that after four months of gains, home prices flattened in October. At that time, low current mortgage rates courtesy of the Federal Reserve and a home buyer’s tax credit (courtesy of Congress) were fueling sales. That should have propped up prices. But it was not enough to overcome the drag created by a glut of 3.2 million new and existing unsold single-family homes — about a seven-month supply.
The situation, we fear, will only get worse in months to come. Rates already are starting to rise as lenders brace for the Fed to curtail support for mortgage lending as early as the end of March. The home buyer’s tax credit is scheduled to expire at the end of April. And a new flood of foreclosed homes is ready to hit the market. It is increasingly clear that the Obama administration’s anti-foreclosure effort which pressed mortgage lenders to reduce interest rates — isn’t doing nearly enough. High unemployment rates also mean that many borrowers who did qualify for aid have been unable to keep up with even reduced monthly payments.
Next Page »
Recent Comments