The European debt crisis and the turbulent stock markets are turning out to be a ‘helping-hand’ for the American families looking for a refinance. Mortgage rates are edging to a record low. The average 30-year fixed-rate loan sank to 4.78 percent this week, the lowest this year and barely above the record of 4.71 percent set in December, last year.
Individuals looking for a refinance are queuing up in large numbers at mortgage lenders, all seeking a low rate for their refinance. Applications to refinance poured this week, reaching the highest in seven months. However, many of the refinance-seekers are holding back for even lower rates, but the only way to know the bottom is when it’s missed.
Some Analysts predict that this window of opportunity may close soon. Investors, due to uncertain environment and declining stock markets, had pounced on government securities. But, once they grow more confident about the stock market it wouldn’t take long to move out of bonds and back into stocks, which will automatically make the mortgage expensive.
Coming to the conclusion – Even though the mortgage is cheap these days, people are not opting for borrows to buy new homes. The number of loans being drawn to buy homes remained at its lowest in more than 13 years. First reason: the special tax credit for homebuyers expired last month. Another reason: after a large number of borrowers fell into defaults and foreclosures, banks needed borrowers to pay a down payment of around 3.5 percent and also to maintain a good credit rating.
The mortgage rates were to rise when the government ended the security-buying program, instead they fell because of fears that Greece would default on its debt. But, it is clear that the mortgage rates would go up once the investors start investing in stock markets, but how long would it take? Will the housing market get back on the ‘good old’ track?
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Security and affordability – Choice of fixed or an adjustable rate mortgage is substantially dependent on these two factors. Where fixed rate mortgage (FRM) offers certainty of constant monthly payments and easiness to calculate monthly cash flows, adjustable mortgage rates (ARM), on the other hand, are inexpensive but modified periodically, based on interest rates.
Home refinancing is when you already have a mortgage on your home and apply for a second loan to pay off the first one. There are a lot of deals out there but one must be wise to select a deal that works best. While taking such decisions, it is important to first determine whether the amount you save on interest balances the amount of fees payable during refinancing.