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A Guest Post by Robert Sommers
If you haven’t taken the time to notice, mortgage rates have recently been sinking towards all time lows. If you have been waiting to lock in a good rate on your mortgage or refinance your home, now might be as good a time as any to do so. Last week Freddie Mac reported that the national average for the 30 year fixed rate was at 4.89% last week, down from 4.94% the week before.
So what exactly does this mean for you? Possibly a lot as this is really great news for both prospective and current homeowners alike. If you have a considerable amount of equity built up in your home and have stable cash flow, you might want to look at refinancing, taking out a home equity line, or obtaining a reverse mortgage. If you are a would-be home owner, the current low mortgage rates are especially attractive in light of the first-time home buyer tax credit that is available. The first-time homebuyer tax credit is a program for buyers that purchase a home between Jan. 1 and Nov. 30, 2009 and is capped at a maximum of $8,000 depending on eligibility. The program has been very well received by home buyers and had a positive impact on new home sales and housing prices as indicated in the latest Case-Shiller index. The index reported the first increase in national home prices in three years as the National Home Price Index rose 1.4%.
It will be interesting to see if President Obama’s new Loan Modification Program will impact housing prices and sales in a similar way. The program is supposed to help make home loans more affordable as well as help homeowners that are struggling to make their mortgage payments. However, due to the shear scope and ambitiousness of the program, I question as to whether the program will be successful given the current economic environment.With the Fed starting to slow down its buying up of Treasuries and mortgage debt and the expiration of the first-time home buyer tax credit coming at the end of the month, don’t expect rates to stay below 5.0% for much longer. We will very likely see a lot of up and down movement in rates during the rest of October as investors watch to see what direction the 10 year treasury yield will take. A lot of the recent decrease in mortgage rates can be attributed to the Federal Reserve buying back US Treasuries in the past weeks. With the Fed planning to stop doing so at the end of the month there will most likely be an increase in treasury yields which will in turn increase mortgage rates. This, along with the first-time home buyer tax credit set to expire at the end of November, will most likely push mortgage rates higher in the upcoming months.
Robert Sommers is a freelance mortgage and real estate writer and an amateur investor based in Baltimore. He has worked for over 25 years as a licensed real estate agent in all areas of commercial and residential real estate.
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