Why are interest rates for home mortgages rising?
They are at 6.47%, last week they were 6.14% and for a while it be even in the 5's.
Answers:
Supply and demand. Everyone that get hosed on an ARM before is trying to refinance now. The surge within new refis shrinks the supply of available funds driving up the rates.
Fear of inflation.
As you point out in your letter, the cutback is slowing down. According to government statistics for the fourth quarter of 2007, the national economy grew at its slowest stride since 2002.
We are not in a "recession" yet -- which is technically two consecutive station, six months, of negative economic growth -- but some economists believe we are heading in that direction.
Usually, a recession is "good news" for the mortgage business because interest rates typically drop as the Federal Reserve tries to "prime the pump" to get hold of the economy rolling again.
But this time, Fed rate cuts are not likely to sustain mortgage rates, because investors don't want to get locked into long-term investments (like mortgage certificates) with low interest rates within a high inflation rate environment.
The national inflation rate is now at its absolute rate since the "bad old days" of the untimely 1980s.
The price of gold is going through the roof, which means abundant investors expect inflation to get worse.
That's bad report for home buyers and homeowners hoping for lower mortgage rates.
Mortgage rates made a very brief dip in January after the first Fed rate cut, but since later, mortgage rates have increased a full percentage point. For example, you could have locked surrounded by a 5.25 percent, 30-year fixed rate mortgage immediately after the first Fed rate cut. Today, you would get almost a 6.25 percent, 30-year fixed rate loan for the same fees.
In fact, mortgage rates are currently greater now than they were in the past the first Fed rate cut in mid-January.
Normally, mortgage rates drop in a slowing cutback, but because of the increasing fears of inflation, mortgage rates are likely to trend upward for the remainder of this year.
I don't usually like to craft mortgage rate predictions because there are so many different financial and financial factors that affect the rates, but in this defence, I would lean toward "locking in" if and when there is another dip in mortgage rates because adjectives signs point to higher rates this year. Source(s): http://www.heraldnet.com/article/2008030…
Banks are in trouble hold little money to lend. You have doubtless heard something like Fannie & Freddie. Between the two, they guarantee over $5Trillion in US mortgages. Without a strong guarantor, limited wherewithal, a declining economic picture, risks are extraordinarily high for banks lend mortgage money. So interest rates have to increase dramatically.
Note that as soon as the "Fannie & Freddie Show" aired on the news, interest rates begin escalating sharply.
Related Questions:
I bought a mobile home on an acre and hold a mortgage. Now I want to build a house nearby. Can I do it?
Should you payment stale a home mortgage of $10,000 or smaller amount or verbs to create payments?
What should I do to obtain a lower mortgage rate on my second home?
Has anyone taken a reverse mortgage on their home and if so are you pleased near it?
If I folder collapse can I preserve my home while still making my mortgage payments as I enjoy be doing?
Answers:
Supply and demand. Everyone that get hosed on an ARM before is trying to refinance now. The surge within new refis shrinks the supply of available funds driving up the rates.
Fear of inflation.
As you point out in your letter, the cutback is slowing down. According to government statistics for the fourth quarter of 2007, the national economy grew at its slowest stride since 2002.
We are not in a "recession" yet -- which is technically two consecutive station, six months, of negative economic growth -- but some economists believe we are heading in that direction.
Usually, a recession is "good news" for the mortgage business because interest rates typically drop as the Federal Reserve tries to "prime the pump" to get hold of the economy rolling again.
But this time, Fed rate cuts are not likely to sustain mortgage rates, because investors don't want to get locked into long-term investments (like mortgage certificates) with low interest rates within a high inflation rate environment.
The national inflation rate is now at its absolute rate since the "bad old days" of the untimely 1980s.
The price of gold is going through the roof, which means abundant investors expect inflation to get worse.
That's bad report for home buyers and homeowners hoping for lower mortgage rates.
Mortgage rates made a very brief dip in January after the first Fed rate cut, but since later, mortgage rates have increased a full percentage point. For example, you could have locked surrounded by a 5.25 percent, 30-year fixed rate mortgage immediately after the first Fed rate cut. Today, you would get almost a 6.25 percent, 30-year fixed rate loan for the same fees.
In fact, mortgage rates are currently greater now than they were in the past the first Fed rate cut in mid-January.
Normally, mortgage rates drop in a slowing cutback, but because of the increasing fears of inflation, mortgage rates are likely to trend upward for the remainder of this year.
I don't usually like to craft mortgage rate predictions because there are so many different financial and financial factors that affect the rates, but in this defence, I would lean toward "locking in" if and when there is another dip in mortgage rates because adjectives signs point to higher rates this year. Source(s): http://www.heraldnet.com/article/2008030…
Banks are in trouble hold little money to lend. You have doubtless heard something like Fannie & Freddie. Between the two, they guarantee over $5Trillion in US mortgages. Without a strong guarantor, limited wherewithal, a declining economic picture, risks are extraordinarily high for banks lend mortgage money. So interest rates have to increase dramatically.
Note that as soon as the "Fannie & Freddie Show" aired on the news, interest rates begin escalating sharply.
Related Questions: