By: Gaurav Bhola, MSM, Managing Editor
The mortgage home loan market has been experiencing fluctuating interest rates recently. Mortgage rates have been see-sawing by about a quarter to a full point, making the public, mortgage lenders, and mortgage brokers fickle about the direction of mortgage rates.
Mortgage rates for 30-year fixed mortgages have dipped below 6 percent for the first time in more than four weeks. This week 30-year mortgages averaged 5.87 percent, down from 6.13 percent last week. This was the first time 30-year rates have fallen below 6 percent since February 14th 2008.
The interest rates on 15-year fixed-rate mortgages, a popular mortgage refinancing choice, dropped to 5.27 percent this week, a slip from 5.60 percent last week.
Also, five-year adjustable mortgage rates, dipped to 5.56 percent from 5.58 percent last week. Conversely, one-year adjustable rate mortgages edged up to 5.15 percent from 5.14 percent last week.
The Federal Reserve (Fed) has been aggressive in tackling rising mortgage rates. It has taken important steps to maintain confidence in the home loan and residential real estate markets.
In addition to the proactive measures by the Fed that led to the lowered interest rates on home loan mortgages, Fannie Mae, Freddie Mac, and federal elected officials have also taken preventative measures. Congress has taken measures to raise the limit on loans Fannie Mae and Freddie Mac can purchase, from $417,000 to $729,750. Under the previous limit, any loans below $417,000 were considered conforming loans while any loans above the limit were called jumbo loans. Fannie and Freddie are government sponsored publically traded companies that purchase mortgage loans from primary mortgage lenders in the secondary mortgage market.
The two companies can purchase conforming loans up to $729, 750 in the secondary mortgage market. This should help increase demand in higher end mortgages and mortgage refinancing.
Also, the two companies have come to an agreement with the Office of Federal Housing Enterprise Oversight (OFHEO) to implement procedures to secure the mortgage market even further. Fannie and Freddie have agreed to reduce their mandatory cash cushion of $20 billion by a third. By law, the two companies are required to maintain at least $20 billion of cash funds on hand for risk management purposes. But that restriction has been temporarily waived with the consent of Congress and the Fed.
The action to free up the two companies’ reserves will allow them to purchase more home loans in the secondary market. The Fed hopes it will lead to a stronger mortgage and housing market. Also, the lower mortgage rates will create more demand for houses overtime. Currently, the atmosphere is ripe for home buying opportunities, an environment of low housing prices and mortgage rates.
