Mevish Jaffer, contributing editor
Thursday, May 17, 2007 2:56 PM
It couldn’t be a better time to buy or refinance a home as affordable mortgage rates continue to flourish this spring. Rates have been going up and then back down again over the past 8 months, but have recently reached a stability point we can all hang on to. The average cost of just about every type of mortgage since the middle of August has been consistently below 6.5%, which translates into good news for potential home buyers or those looking to take out a second mortgage on their home.
Mortgage rate comparison charts are telling us that many home loan lenders are now offering rates below 6% and attaching reasonable fees of $1,000 or less. Granted these rates are not the cheapest the industry has ever seen. Just around 4 years ago, mortgage rates dove down to below 5.3%, the lowest it’s ever been since the company, Interest.com started performing weekly surveys of major lenders back in 1985. Still, current rates are less than the 7-8% people were paying on a home during the mid to late 90’s. Those with fair credit can anticipate costs less than last spring and summer, when rates were almost at 7% for 30-year fixed-rate loans. According to the government chartered company that purchases mortgages from lenders, Freddie Mac, 30-year fixed rate loans will average at 6.2% this year and future anticipated rates are at 6.4% for 2008.
Affordable costs is good news for most buyers who will appreciate the current low mortgage rates, however what does it mean for those with less than average credit standing? The truth is poor credit buyers may experience difficulty to get a mortgage than they would have around this time, last year. Lenders are making it harder for these individuals to obtain loans after the explosive increase in the number of defaults and foreclosures they have recently seen. The fact is, home loan applicants who would have otherwise had no problem qualifying just a few months back, are now experiencing great difficulty because they don’t earn enough and/or have way too much debt to meet the strict new requirements being enforced by home loan lenders.
Another factor responsible for brining home financing rates down this spring is the fact that the Federal Reserve Bank has recently ended a two-year battle to fight the rise of inflations by pushing interest rates higher. Because the Federal Reserve Bank is the “mother” of all banks, so to speak and lends money to all of the commercial banks we do business with on a daily basis, it starts charging commercial banks extra to borrow money. As a result, we are passed along with higher rates from those banks for the different types of loans we want to take out and react the only we can, by spending less money and making it harder for vendors to raise their prices. This in-turn allows for inflation to regain control again. As long as prices remain consistent for the next couple of months, the Federal Reserve won’t deem it necessary to push rates up again, which means we should be able to experience affordable home mortgages for the rest of the year.
