Posts Tagged ‘variable rate mortgages’
Having a good idea of where mortgage rates are headed, can save homeowners or potential home buyers, a lot of money. Refinancing, loan modification, or purchasing a home when the interest rates are lowest, will save you a lot of money every month. So, here are my home mortgage rate predictions for 2010, and how I came to them. For 2010 I predict that mortgage rates for a 30 year fixed rate mortgage, will be around 5.94% for most of the year. While that does not seem to much higher from the current average rate of 5.19%, it is much higher than rates that may be available early in 2010.
Any Mortgage Rates Forecast Rises Due To Falling Supply And Rising Demand- Mortgage interest rates, like all retail interest rates, depend on the general interest rate in the wider economy – the rate at which banks and other financial institutions can borrow funds. This is usually benchmarked by the 90 day bank bill rate. Generally, lenders only have 10% of the funds they lend out as mortgages in deposits – the rest is borrowed. This is why having too many defaults on mortgages can get a bank into big trouble – they can no longer afford to pay their own debts then! The sub-prime crisis greatly reduced the willingness of other organizations with money to lend it to banks for the purpose of mortgages. This means that the supply of credit has markedly reduced. A low supply and a steady demand will always cause prices to rise, and in this case, the price of money is the interest rate.
I think this 5.19% rate will remain the same until mid October of 2009, then go back down to 4.69% from the middle of October through April 2010. Then the drastic rate increase of around 1.25% will take place as the housing market and economy show signs of recovery.
Mortgage modification or refinancing when rates are their lowest is the best way to save a lot of money on your home loan. You should take action and do something about your out of control mortgage and refinance now. If you can wait until rates are the lowest that is best, however, if your are facing foreclosure take action now.
However, you do have the ability to remain informed about the significance of today’s interest rates by looking at how they trend over time. Have a look 1-month, 3-month and 1-year rate trends and see how today’s rate compares. You can at least get a sense of where the rates are today, which can help you make an informed decision about when to apply. Remember an additional layer of influence you have: All of the discussion thus far has addressed average interest rates. However, the rate for which you qualify is also a function of the individual lender with whom you apply, as well as your credit score. Be sure to apply to at least 5 lenders before deciding upon one, in order to get yourself the best rate.
Learn more about Obama Mortgage Relief Plan Qualifications.
These past couple of years have been a roller coaster ride when it comes to business and finance. The thing about these economically troubled and recessionary times is that the crisis has really hit home – literally. Housing Market Cause and Effect- The housing market in the United States, and the big banks and institutions upon which that market was built, was the chief catalyst for the all the economic turmoil. Turmoil that gained global significance.
Ben Bernanke, the Federal Reserve Bank chairman, continues to state that the Fed is going to work to keep rates as low as possible. The reason that the Fed continues to do this is to help banks and other institutions borrow money at very cheap rates which in turn will help them to improve economic conditions. As long as the overall economy continues to struggle it will likely be the case that overall rates remain very low. With that being said the mortgage rates forecast for early October looks very similar to September as we expect to see 30 year home loans around 4.25% and 4.5%.
Feds Buying Securities to Stop- The Federal Reserve has indicated that it will soon curtail this spending. Eventually it will stop buying these securities altogether. Of course, these securities will revert to purchasing done on the private economy by private investors. And investors like to see significant returns on their deposits. Pumping the Recovery- Over the last few years, government policies designed to stimulate the economy – printing tons of unsecured sawbucks among them – has left the U.S. Government with an outrageously colossal debt, which in and of itself could despoil the recovery. U.S. bonds are not attracting investors as they once did. This is having the effect of raising interest rates, and that too will have a great effect on the housing industry.
Factors Which Make Mortgage Rates Predictions Rise: Increased Risk- Apart from the underlying real interest rate determined by the broader economy, the rate of inflation, and the supply of money available for mortgage lending, there is another factor which comes into play in any investment decision – risk. Mortgage rates in general will depend on the overall risk involved in the housing market. If house values plummet, as they have in some parts of the US, then the default risk for the banks suddenly increases, which means that they will be wanting to charge higher mortgage interest rates; predictions will take this upward pressure into account.
Factors Which Make Mortgage Rates Predictions Fall: Government Intervention. The US Government is an 800-pound gorilla in the financial markets. By issuing Treasury bonds at different interest rates, the government can influence the overall market for money, and thus affect the “real” interest rate. Mortgage rates predictions based on purely economic considerations might indicate that mortgage interest rates are due to rise, but while the political pressure is running high, and in an election year, the government will do everything in its power, however economically irresponsible in the long term, to push the interest rate rises off until after the November elections. Mortgage rates predictions must take this political distortion of the financial markets into account.
Learn more about Obama Mortgage Relief Plan Qualifications.