Rates for fixed mortgages escalate
Friday, July 31, 2009
Fixed rate mortgages in US escalated and were recorded at an all time high since November 2008. This stalls the Fed’s plan to reduce cost of borrowing. The 30 year rate escalated from 5.29% to 5.59% a week ago. As far as rates for 15 year mortgages are concerned, they were 5.06%.
The increasing rate is the last thing that consumers wanted and this could make the housing market even more sluggish. It will reduce the number of people opting for refinancing or buying a new house. This is evident from the reduction in the number of mortgage applications that was lowest ever since February. Not only this, value of shares of reputed homebuilders has nosedived drastically as lenders anticipate that if home loan payments become expensive, it will turn away several prospective home buyers.
Due to rising rates, sale of homes will subside and so will refinancing. It will have a negative impact on consumer spending, making it more sluggish. The Federal Reserve had announced that it would buy mortgage backed securities from Freddie Mac and Fannie Mae that was worth USD$1.25 trillion. This program helped in pushing rates to as low as 4.78% in April.
Rising rates and drop in home prices are simultaneous. And this is what has been happening. Number of foreclosures are also increasing manifold. Market analysts are of the opinion that foreclosure filings in US exceeded the 300,000 for 3 months in a row in May and it is being expected that it may reach the 1.8 million mark during the first half of the current year.
Interesting facts about mortgage market in United States
• As many as 321,480 property owners received an auction notice or a default notice last month. Many had to lose their homes too. The number of repossessed property or defaulters was 18% more as compared to last year.
• Since March 2008, the S&P/Case-Shiller home-price index dropped by 18.7%.
• Due to increase in defaults, 20 major metropolitan areas witnessed a drop in home prices
• The week that ended June 5, the number of applications for mortgage refinancing or buying a home dropped by 7.2%. This information was provided by the Mortgage Bankers Association.
Posted byAdmin at 3:39 AM
Labels: mortgages