April 3rd, 2009
Mortgage Rates Keep Falling
Each day there are new headlines out there proclaiming the latest lowest interest rates. While it is true that the rates are falling and mortgage applications are up across the board, there still underlying issues with the housing market beyond the lowest interest rates available.
Unemployment rates are still at close to an all time high, and until those numbers are going in a positive direction, it is almost irregardless how low the interest rates go. Lending guidelines have changed drastically in the last few years in order to curb the predatory lending that was rampant in years past. These new, stricter guidelines cause a vast majority of these applications to become declined.
The major reason why the low interest rate doesn’t help as much as you would think is the depressed house values. The loans with the lowest interest rates typically at limited to 80% loan to house value. Most houses have lost so much value that even if you bought your home several years ago and put 20% down; you still not qualify for this loan. What’s the point of a really low interest rate if only a select few can actually qualify?
When the rates come out next week, we might even see another small dip in the 30 year fixed to the 4.7 range. The economy needs more jobs for the record amount of unemployed entering the ranks. More jobs would mean more money being invested back into the financial markets as well as the housing market. But until people stop losing their jobs, these small decreases to the record low rates don’t help the average American or the health of the housing market.
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