The sound and fury of the financial markets continue to warn of an impending recession, however, the silver lining is mortgage demand reached a three-year high this week. The decline in mortgage rates over the last month is causing a spike in refinancing activity – as homeowners currently have $2 trillion in conventional mortgage loans that are in the money – which will help support consumer balance sheets and increase household cash flow. On top of that, purchase demand is up seven percent from a year ago.
The economy continued to show strong business activity and growth in employment which drove the 30-year fixed mortgage rate to a seven year high of 4.94 percent on national average– WE are still at 4.75%
Higher mortgage rates have led to a slowdown in national home price growth, and the price deceleration has been primarily concentrated in affluent coastal markets in California.If you are in an adjustable rate mortgage Lock in a fixed rate now.!
The Federal Banking reserve chairman ended the quantitative easing program, which had the government buying Trillions of bonds. This was to create a large demand to keep prices down. California mortgage rates are now on the rise and will continue to rise. If you are looking to refinance your home loan in California now is the time to see what you qualify for and what mortgage refinance programs are available to you as a homeowner in California.
So with the demand now diminished, prices will go up so in other words mortgage interest rates will rise up as they are closely associated with bonds. While the federal reserve rate remaining at historical lows, as the economy grows they will have to raise the rates and mortgage rates will again rise, especially the adjustable rates tied to those rates/indexes.
It is important if you are going to remain in your home and have an adjustable rate mortgage to know what the consequences of holding on the the low rate you have.
What is your index and Margin is the first question you should know. Libor and monthly index's are the first to go up and have the highest margins or higher rates. What is the maximum your capped out rate you can go to? This is the highest rate you mortgage can go to and what is the maximum it can go up per year. Many of these adjustable loans can go up 2% a year and you could find yourself having a much higher payment in a short time.
It is always difficult to trade up to a fixed rate.. If adjustable rate mortgages had the same rates as fixed no one would take them! So locking in a fixed rate is going to be at a higher rate than the variable rate loan.
So the decision has to be made with the time frame of ownership you have to stay in the home. It is always better to convert to a fixed when the fixed rates are lower obviously than higher.
With the certainty of rates going up and fixed rates still at very low levels this is the time to convert to a fixed, if you are keeping your home.
Many companies try to sell you on no cost loans at higher rates, but it is possible to buy down the interest rate and thus the payment to keep your new payment closed to what you are currently budgeted.
Give me a call and I can work out several scenarios. /options that will give you peace of mind and continual affordable ownership.