Mortgages might be getting cheaper
Mortgage rates could become lower. As lower rates make homes more affordable, this is positive news for existing and prospective home buyers. The existing market, characterized by slowing new construction and declining interest rates, provides a unique opportunity for anyone in the market to buy a home.For the past five weeks, interest rates on 30-year fixed rate mortgage loans have been climbing, and this weeks drop signals a change from the norm. Economists believe that the drop in mortgage interest rates is the result of general economic pressure applied to consumers by the housing market. Essentially, as rates increased and owning a home became more expensive, homeowners felt the squeeze. Since the high cost of housing is slowing economic growth, a drop in mortgage rates is likely to save consumers some money and inject some growth into the economy.
Freddie Mac, a mortgage corporation chartered by the federal government, stated that mortgage interest rates (for 30-year fixed rate loans) averaged 6.69% last week, down from 6.74% the week prior. This decline is actually the first drop since mortgage interest rates reached their highest level in the past 11 months. While investors are still reacting to this change, the result is positive news for prospective home buyers, who can take advantage of more favorable interest rates. Existing homeowners may want to take this opportunity to consider refinancing their mortgages, especially if they have mortgages with fixed interest rates.
The climate of increasing interest rates and high housing costs also has led to slowdowns in the new home building market. The construction of new homes (both houses and apartments) fell 2.1% from April to May. This is an overall decline of 24.2% from May 2006. The National Association of Home Builders announced that new home builder sentiment – an index measured by the organization has fallen to a 16-year low.
Among the reasons new construction is slowing is that rates have been high for 11 months, resulting in less sales activity from prospective home buyers. When rates are high, new homes don’t go up. As a result, this can be an interesting time to purchase a home, especially if you have a high credit rating (and can get a more favorable interest rate). With new construction slowing, there are bound to be bargains on the market, making this an ideal time to pick up an investment or vacation property.
The mortgage and housing markets are always moving, so it pays to stay in touch. If you keep track of the direction of mortgage rates, you will know when it is time to refinance your mortgage, in order to save money on your monthly payments. By keeping track of both the mortgage and housing markets, you will be able to identify the right time to buy a new home, perhaps one to use as an investment. Watch the market. Keep track of interest rates and new construction. These small bits of information can scream loud opportunities to you if you are paying attention.
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