I thought that interest rates would be increased by about .5%, and they were, as a response by mortgage lenders and banks to ease the massive amount of homeowners looking to refinance or get a home loan modification. This way, the lenders and banks can separate homeowners who truly need to save their home from foreclosure or mortgage default, and those homeowners who are just looking to save money. This temporary rate increase was issued in order to catch up on existing applications and approvals which have continued to flow in since Obamas announce of his “Making Home Affordable Plan” in March.
This “Making Home Affordable Plan” allowed homeowners to get a 2% home mortgage refinancing or modification. This was made possible by the Government providing over $75 billion in cash incentives to lenders and banks who approve homeowners who are “at risk” wither credit wise, or of losing their home. As a result a large number of applications came in and the paperwork was overwhelming.
Right now, mortgage rates are around 5.19% for a 30 year fixed rate home loan. Remember though that only homeowners who have a good FICO score, and either 20% equity in their home or 20% cash down can take advantage of the lowest rates. However, homeowners with less than perfect credit should still jump at the chance to refinance or modify their home loans. Even though rates are not their lowest, they are still plenty low to save millions of homeowners hundreds of dollars per month. However, if you can wait at all to go through with your refinancing or loan modification, I would, and here is why.
Recently, home interest rates have been increased across the board by about .5%. While this is not a extreme change, it did allow the mortgage lenders and banks a chance to catch up on their paperwork from homeowner applications which have been flooding in since Obamas “Making Home Affordable Plan” announcement. Now, with the increased rate, the lenders have pretty much stopped the applications from homeowners who just want to save money, and are focusing on homeowners who need to save their home. Once these applications are done, the mortgage lenders and banks will be hungry and ready for a new round of home loan modifications and refinancing. So, when this happens, around mid October I predict, home interest rates will drop by .5% or so to an average of 4.69% for a 30 year fixed rate home loan.
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.
Mortgage interest rates were recently increased from 4.69% to 5.19%. I thought this would happen as a response from mortgage lenders and banks who were over burdened with applications from hopeful homeowners looking to take advantage of the all time low interest rates. The rates were increased by .5% to stem the flow of refinancing and loan modification applications, but still keep a low enough rate to help a lot of homeowners save their home and avoid foreclosure.
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.
Down payment. Many people choose to put less money down when purchasing a new home. They want to save their money to either have a nest egg, invest it in other ventures, or just to have laying around for various reasons. While this is often a good move, many of these borrowers never realize that if this money were to be put into the home, a 10 year fixed mortgage would have made sense for them. They could have gotten a much lower rate and had a manageable monthly payment, saving them thousands in interest payments.
Impact of lower interest rates. Many borrowers underestimate the impact a lower interest rate will have on their monthly payment. While the best 30 year mortgage rates are at about 4.15 %, many lenders are offering rates as low as 3.25% for 10 year loans. Your monthly payment will be more than it would be for a 30 year loan, but in many cases, not much higher.
Savings on closing costs and other fees. Many people choose to roll the fees associated with acquiring their loan into the principle, causing their APR to increase. The 10 year fixed mortgage will give you the lowest APR possible.
After the 10% gain in the treasury rate yields, home loan rates went from 5.05% all the way up to 5.5% in just five short days. At this point, many analysts were convinced that we were going to see rates start a steady movement to 6%. With the 10 year yield up trending, it was almost inevitable, right? Well, not so fast. Just when loan rates hit 5.5% there was a speech by the Federal Reserve Bank saying that they were going to do everything in their power to keep interest rates historically low.
After this speech by the Federal Reserve Bank, rates saw a steady drop all the way down to 5.1%. We are currently seeing mortgage interest rates at 5.2% but that is likely to change in the very near future. It seems just when a direction is created, something happens to forces home loan rates in the opposite direction. It will be very interesting to see where we go from here but it is not an easy forecast, that is for sure