Tag Archives: Interest rate

Real Estate

Interest Rates May Rise Sooner Than Expected

Photo courtesy of http://www.funnypica.com/
Photo courtesy of http://www.funnypica.com/

 

Federal Reserve Chairwoman Janet Yellen said that the Fed may need to raise interest rates sooner than expected, but it all will hinge on the labor market.

“If the labor market continues to improve more quickly than anticipated by the Federal Open Market Committee, resulting in faster convergence toward our dual objectives, then increases in the federal funds rate target likely would occur sooner and be more rapid than currently envisioned,” Yellen testified to the Senate Banking Committee on Tuesday. On the other hand, “if economic performance is disappointing, then the future path of interest rates likely would be more accommodative than currently anticipated.”

Interest Rates and Housing

Currently, the majority of Fed officials expect the central bank to begin raising interest rates about a year from now. The Fed’s benchmark short-term rate has stayed near zero since December 2008, which has helped to keep interest rates near historical lows.

Recently, the unemployment rate has fallen rapidly, reaching 6.1 percent in June. But wage growth has remained weak, Yellen noted.

Also, Yellen said, the housing market remains sluggish, which she said could slow the economic recovery.

“The housing sector has shown little recent progress,” Yellen testified to the Senate. “While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year’s increase in mortgage rates, and readings this year have, overall, continued to be disappointing. The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery.”

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Real Estate

Housing Affordability Declines as Interest Rates Go UP

Picture courtesy of http://www.treadstonemortgage.com/
Picture courtesy of http://www.treadstonemortgage.com/

The majority of housing markets remain affordable to the average family, but rising mortgage rates and rising housing prices are causing more families to have to stretch financially, according to Freddie Mac’s U.S. Economic and Housing Market Outlook for December.

“Rising mortgage rates and rising housing prices over the past six months are making it more challenging for the typical family to purchase a home without stretching beyond their means, especially in the Northeast and along the Pacific Coast,” says Frank Nothaft, Freddie Mac’s chief economist. “Like most, we expect mortgage rates to rise over the coming year, so it’s critical we start to see more job gains and income growth in the coming year. This will help to keep payment-to-income ratios in balance — an important factor not only for first-time buyers but for sustaining homeownership levels among existing owners.”

According to Freddie Mac’s report, more than 70 percent of the nation’s housing stock remained affordable to the typical family in the third quarter at a 4.4 percent interest rate for a 30-year fixed-rate mortgage. However, that percentage decreases to about 63 percent at a 5 percent mortgage rate;  55 percent at a 6 percent interest rate; and 35 percent at a 7 percent interest rate.

Source: Freddie Mac

 

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Real Estate

Taking Advantage of Low Mortgage Rates

English: Mortgage debt
Mortgage debt (Photo credit: Wikipedia)

 

 

 

 

 

 

Mortgage rates continue to set new record lows, leaving many home buyers and re-financers wondering how low rates can go and how to capture the best rates now.

  • Many economists are forecasting that mortgage rates will rise again later this year as the American economy gradually improves and as more global investors turn to the U.S. as a safe haven for money.
  • The average rate on a 30-year fixed-rate mortgage averaged 3.71 percent the week of June 14.
    The rate had averaged 3.9 percent three months earlier and 4.5 percent a year earlier.
  • According to one economist, rates could possibly fall further, perhaps as much as a quarter of a percentage point, but it is more likely that they would start a “slow drift” upward.
  • Those planning to refinance or buy a home in the next two or three months might want to consider locking in a mortgage rate now.
  • Borrowers with rate locks, with a built-in deadline, often receive priority treatment from lenders, because the borrower is telling the lender that he or she is serious about closing soon.
  • Lock-in costs and policies vary widely, and are based partly on the time frame the borrower wants covered.  Most borrowers will need a 60- to 90-day lock.
  • If interest rates continue to fall during the lock period, borrowers can ask the lender to rewrite the rate lock at an additional cost, or obtain a “float-down” provision in the original agreement.  A lock with a float-down agreement allows the borrower to change the rate, often only once, before closing on the mortgage.  This option is generally more expensive than a standard lock.

 

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