The Trends In Mortgage Rates
Mortgage interest rates have been trending upward for the last few months and every data point suggests that the historic lows of 2012 will not be seen again.
Consumer confidence has been on the rise since the end of the recession, with a dip in 2012 and another dip in January of this year. What has not yet happened is a slight correction for interest rates and stock prices that almost all analysts agree will happen before interest rates continue their upward run. Predicting when that will happen is anybody’s guess. If you are considering purchasing or refinancing, now is the time to act.
According to Fannie Mae’s 3rd Quarter Financial Report, only 21% of their portfolio was originated in 2012. That means that 79% of the loans on their books have interest rates above current market rates. Even more amazing is that 37% of the portfolio was originated before 2009. If you fit this profile, you should at least explore the opportunity to refinance to a market rate that is still lower than almost any time in history.
The downward trend in mortgage interest rates started after the financial crisis with the announcement of the first round of Quantitative Easing (QE) in December of 2008. Interest rates fell immediately and continued to decline as the economy struggled to gain footing. Since that time, rates fell to all-time lows in 2012 and have begun to rise off of the artificially low bottom created by unprecedented monetary policy and slow job growth. For a detailed timeline and understandable explanation of QE1 through QE3, please follow this link: http://english.cntv.cn/program/newsupdate/20121213/104606.shtml
As the economy has begun its recovery, stock prices have moved back to pre-crisis levels and as of Mar 5th, 2013 have reached an all-time high. At the same time, interest rates remain low (yes, they are still incredibly low). The Federal Reserve continues to undergird the financial markets and has committed to continue QE3 until unemployment reaches 6.5% (most recently reported at 7.9%). Even with the Fed buying $40 billion of mortgage backed securities per month, interest rates have risen steadily over the last couple of months. This rise will continue as the economy continues to very slowly gain traction. The current combination of low interest rates, low housing prices, low housing inventory, increasing consumer confidence and a recovering economy has produced an environment that has never been seen before. There has never been a better time to buy and finance a home.
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