Finance Loans CA

In recent years, the housing market has been on a very bumpy financial ride. Due to the sub-prime mortgage crisis which resulted in millions of homeowners losing their homes due to the inability to pay their monthly mortgage payments, President Obama’s mortgage refinance stimulus plan was implemented to help people stay in their homes and encourage people to buy a home. The plan included lowering interest rates so that people could take advantage of the savings. Now that the economy has shown signs of improving, many people are wondering how long mortgage rates will stay low or if there is going to be an increase in the coming months and next few years.

In this current economic environment where improvement in the economy is not happening as fast as we would like, as well as the continued Government and Federal Reserve support, most experts agree that for the next few months, there should not be much of a change in mortgage rates. Currently 30 Year Fixed mortgages rates have been hovering just under 5%. It is expected that 2010 will see rates rises to just over 5%. This is mainly due to the economy not getting worse and there are some signs that the economy will get better. However, many economists predict that low mortgage rates will be here for a little while, but not for long.

Economists suggest that as the economy grows and banks begin to increase their lending, mortgage interest rates will steadily increase to rates preceding the housing market crisis. In the next few years, many predict the pre sub prime mortgage crisis rates will return. This may be a good time for prospective homeowners to consider buying a home as the rates will not be making any further dramatic reductions, and over time they will begin to rise. Locking into a low rate now will definitely save homeowners money in the future as the rates start to rise. As well, by the first half of 2010, the Federal Reserve’s Housing Recovery Plan of buying as much as $500 billion of securities backed by Ginnie Mae, Freddie Mac, and Fannie Mae, will be coming to an end, so mortgage rates are expected to rise. Many experts believe rates will rise to over 5%.

Another consideration many housing market forecasters are worried about is inflation. Concerns about inflation could send Treasury yields higher which would cause an increase in mortgage rates. So, the mortgage rate prediction by many economic experts is that for the next few months, rates will stay about the same, and then they will begin to slowly rise in the next few years, depending on the state of the economy and the recovery progress of the housing market. But do not expect a continued decrease and the rates will eventually go up.

If you are considering refinancing or planning to purchase a home in 2010, this may be a great time to lock into a low interest rate mortgage. If not, you may miss out on a great deal if you wait too long.

There are a tonne of different ways someone can save money and invest in. We offer some of the best GIC rates. We also offer competitives mortgage rates. Do your research online and find the best rates.

Mortgage Rates FAQ:

Question: Why are bank mortgage rates always higher than credit unions?
Is there a reason for this? Does the bank offer services the credit unions don’t?

Answer: Credit Unions are owned by their members and don’t have to make a profit. Credit unions are generally more conservative in their lending so they lose less money from making the riskier loans their commercial bank brothers will. While it’s not always true, a Credit Union will often have better interest rates on savings also.

Question: What are some national fiscal policies that can affect mortgage rates?

Answer: The U.S. central bank, which is the Federal Reserve, makes decisions regarding fiscal policy. They decide whether to increase or decrease the money supply by decreasing or increasing interest rates. If the Fed decides to decrease interest rates, banks are more likely to lend to commercial establishments, as well as consumers, and as a result, consumers are able to obtain loans (mortgage, business, etc.) at lower interest rates. (We’re seeing this today with the current crisis.) If the Fed decides to increase interest rates, (which they are going to do soon) this gives banks incentives to keep more money in reserves, where they can earn a higher profit, therefore they will tighten their lending standards, and offer loans at higher interest rates.

Question: Once the $8,000 tax credit and mortgage rates rise, where will home prices go then?
What happens when the tax credit goes and rates got 7%?

Answer: Down, because the tax credit is priced into home purchases by the sellers, and down again, because interest rates at 7% (still a very low rate, historically speaking) will mean that people will be a little less able to borrow the principal.

Question: Should we have a legal right to capped mortgage rates on a homeowner’s primary residence?
What affect would a 2 or 4% cap on primary residence mortgages have on the economy?

Answer: I would not agree on any cap for mortgage rates because this would require a regulated market for mortgages versus the current open market concept. Furthermore, the mortgage rates reflect up to a large part the risk which the mortgage bank accepts to take when granting the loan.
Additionally, the rates are influenced by the market as such, by the demand of loans as well as the refinancing costs (or capital costs) banks have. Putting a cap on the rates or even regulating them would eliminate market forces.
On the other hand, any regulation would not improve the quality of a mortgage loan. This is still in the hands and under the control of the bank as well as the correctness of information provided by the client.

Question: Borrow more on fixed rate mortgage, is that possible?
We bought the house about 2 and half years ago on 4 year fix rate. Its only about a year and half to go till we finish our fixed rate, but we needed some cash for home renovation. Can we borrow more money from our mortgage?

Answer: Not without changing the loan agreement. The big thing is that your house probably isn’t worth what you paid for it a couple of years ago at market valuation, so you might not have enough equity to get a bigger loan.

Question: Is it hard to get lower interest rate on existing mortgage?
I have a mortgage [VA] through Citi @ 7.25% which I know is really high. How hard is it to get it lowered? Every year they send me a letter saying monthly pmts. are increasing due to escrow shortage [taxes], even though there’s no increase in prop.tax [Pmts. are never late].

Answer: You need to check out the property tax and escrow, they do an escrow analysis annually. Prop taxes usually increase. Ask Citi for loan modification. Call and ask, and keep calling and asking. That leaves your loan intact, but reduces your rate and is easier and cheaper than doing a refi.

Question: Fixed 30 year mortgage rate?
I would like to know if how much do the 30-year-fixed-mortgage rate varies from bank to bank? Given that I have already been pre-qualified for a loan and there is incentive (0.5point back towards closing cost) from preferred lender from my builder. Should I bother to shop around to see if other banks would beat out the preferred lender?

Answer: The lender associated with your builder could be adding some costs and telling you those costs are “normal”. That .5 point you think you are getting back could be built into the price of your home or the rate you will get. Also, now the builder knows exactly how much house you can buy. See what other lenders can do for you.

Question: 1 year LIBOR or Fixed rate mortgage?
My interest only ARM has reached the 5 year mark and now will begin to adjust yearly based on LIBOR. We looked into refinancing and have been offered 5.5% fixed, closing $3500. Our home value is $10K less than what we bought it for and we are $20K in CC debt. Do we lock in the fixed or continue with the low LIBOR rates to help pay off debt?

Answer: In this economy, a fixed rate would be better. If things stabilize, you can look at refinancing in the future to get a lower interest rate, but 5.5 is pretty good.