Why now may be a great time for a mortgage
Increased unemployment. Decreased housing prices. Low deposit rates. Let’s face it, the economic news over the past few years has been less than positive. However, those who bought or refinanced homes in 2010 have been able to capitalize on some very good news – the lowest mortgage rates our country has seen in decades. According to Freddie Mac, the average rate for a traditional 30-year fixed mortgage in 2010 was the lowest in 55 years.
Of course, this brings up two very important questions: will mortgage rates continue at historic lows in 2011 and, if not, how much will they rise?
If you asked 100 different economists or financial gurus, you might get different answers. Many believe that although the market will not see the historic lows of 2010, the rates for 2011 will remain attractive to those looking to purchase or refinance a home.
Factors that affect mortgage rates.
If you have spent any time looking at mortgage rates, you know they can fluctuate from year to year, month to month, and even day to day, but do you know the factors that impact these rates?
One of the most important factors is the state of the economy, which has a direct impact on federal interest rates. If, for example, the national and global economies improve, the Federal Reserve Bank (aka “the Fed”) may raise interest rates in order to guard against inflation. When this happens, mortgage rates could increase.
The economy also impacts another factor that controls mortgage rates – the secondary market. Mortgages that are sold on the secondary market to Fannie Mae and other investors are packaged and sold as securities or mutual funds. When the economy is doing well, investors who purchase these vehicles will demand higher returns, forcing lenders to raise mortgage rates.
The Fed also affects interest rates with its monetary policies. For example, in 2009 and 2010, the Fed spent billions of dollars investing in mortgage companies in an effort to keep mortgage rates low and encourage buyers to purchase homes. If the Fed decides not to continue investing in these companies, interest rates could rise.
Another important consideration is housing demand. In general, if there is high demand for home mortgages, mortgage rates will rise. Conversely, if people are not buying homes, rates may decline.
Now is still a great time to buy or refinance a home.
With rates still at low levels, it may be a great time for you to purchase a home or refinance a mortgage. You might be able to lower your monthly payments and/or the term of your mortgage, or convert an adjustable-rate mortgage to a low fixed-rate mortgage.
We would be happy to sit down with you to help you understand all your options. To speak with us about your unique situation, stop by your nearest UCCU branch or call us today at (801) 223- UCCU (8228). Don’t miss out … these low rates may not be here forever.