The economic downturn has had a huge impact on current mortgage rates, housing ownership and foreclosures. Mortgage interest rates have been sharply affected by the continuing downturned housing industry and the rising numbers of foreclosures. In January 2010, one in every 409 households in the country had received a foreclosure filing; according to Realtytrac.com’s U.S. Foreclosure Market Report. The Government is working to try to stabilize the housing market with a number of programs which have resulted in lowering mortgage rates and offering stimulus and anti-foreclosure options for the home owner.
The average mortgage interest rate on a 30-year, fixed-rate mortgage rose to 5.05 percent in December, 2009; after hitting an all-time low in early December but could climb to 6 percent mortgage interest rate by the end of 2010, according to Freddie Mac.
The First American CoreLogic, a real estate research firm reported in February that by the end of 2009, 24% or 11.3 million homeowners had a mortgage worth more than their home is worth. This “underwater mortgage” situation has resulted in 1 in 4 Americans owing more than their house is worth. Concern that homeowners will walk away from mortgages has created more incentive for changes in the mortgage interest rates and an increase in the options for homeowners for mortgage finance options.
The Federal Reserve program has been a key catalyst for stabilizing current mortgage rates and for predicted changes in the coming months, a result of implementing a plan to buy blocks of mortgage-backed securities issued by firms such as Fannie Mae and Freddie Mac. That program succeeded in immediately pushing mortgage rates well below the 6 percent mark when it was announced last year. Predictions are that the program will be tapered off soon, creating concern that this will create significant increases in the mortgage interest rates.
Other incentives to resolve mortgage interest rates problems and the housing industry issues are being considered by the Whitehouse, Congress and the Banking Industry. Barney Frank, House Financial Services Committee Chairman wrote in a letter to Banking CEOs: "To save homes on a large scale, we must move past temporary modifications in interest rates or terms and focus on permanent principal reductions that result in truly sustainable mortgages."
“Making Home Affordable”, is the central theme of the Financial Stability Plan introduced by The Obama Administration, aimed at stabilizing the housing market and helping 7 to 9 million Americans reduce their monthly mortgage payments to more affordable levels. The Home Affordable Modification Program commits $75 billion to keep up to 3 to 4 million Americans in their homes by preventing avoidable foreclosures.
Historically, mortgage interest rates have been most impacted by the consumer’s credit rating. The higher the credit score, the lower the mortgage interest rate. In the current housing state, many homeowners have been unable to refinance due to declining credit scores. Even with the current mortgage rates being lower than previous years, the individual’s credit history will still impact their ability to obtain a lower mortgage rate. As a general “rule of thumb”, your monthly mortgage payment including property taxes and insurance should not exceed 28% of gross monthly income. All loans (car, mortgage, student loans, and credit cards) should be less than 36%.
Predictions for the mortgage rates for 2010 indicate that the part of the year
will continue with lower rates, with higher rates occurring as the year goes
on and 6.0 or higher may be possible before the end of the year. Many of the
current foreclosures occurred when variable interest mortgage rates when up
drastically.
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