LOW MORTGAGE RATES - With a view to accelerate the growth rate of the US economy, the federal government’s policy of pumping billions of freshly minted dollars to acquire treasuries have led to an all time low mortgage rate record in 2010 and into 2011 leading to a change in the market scenario to most homeowners.
According to a study by the US federal reserve on mortgage market, although financing a home has become relatively cheaper now, hardly anyone bothers to refinance their home not only because most homeowners who locked in low mortgage rates during 2003-2005 don’t find it worthwhile to refinance but also because of the fact that most of them don’t qualify for refinance and the bank adopts the policy of strict lending rates implying that, although many have been trying to cut down their monthly payments by starting afresh the terms of his home loans, yet most of them don’t want to waste their time and money to secure a new loan which offers only a slightly lower interest rates.
The current mortgage loans is at its lowest since 1971 with a 4.17% rate for fixed loans of 30 years and 3.57% for medium term loans of 15 years. However, the interest rates on most of the other loans considerably steeper than the actual rates. The interest rate paid by about 16% of fixed rate and 12% of floating mortgages stood between 4% to 4.99% on oct31 2010, leaving the major chunk of about 27% as adjustable mortgage rates that was allowed to sync with the market conditions and pay an interest of about 3% to 3.99%. However, regardless of the terms of your mortgage loans, almost 50% of outstanding loans pay 5% or higher rates.
Historically speaking, as interest rate falls, it leads to an increase in refinancing, however the recent fall in interest rate have failed to live up to its expectation and the reason for that is anybody’s guess ranging from unemployment to imbalance between home values and mortgage rates to bank’s lending policy.
