low mortgage interest rates

AMORTIZATION REFINANCE

The repayments of a loan, that includes the principal and interest and repayments are paid over a period of time is known as amortization. These days there is a need for mortgage amortization because there is a change in the thinking of the people. In the past, the maximum loan term was for 20 years now loans come with a term of 40 – 50 years. People seem to be taking loans for the next generation to pay off.

However, the bright side is that investing in a house pays, for the market for real estate is booming. You are able to recover your money fast due to the increase in the value of the houses.

So, lowering mortgage rates with increasing real estate markets is good for long term amortization. It will only become a problem if the interest rates increase, because then you will not be able to renegotiate a new deal on the same property.

low mortgage interest rates

Historically Low Mortgage Rates Spur Refinancing Frenzy

Historically low mortgage interest rates have homeowners refinancing in record numbers, according to the latest Weekly Mortgage Applications Survey, released today by The Mortgage Bankers Association (MBA).

The MBA reports that its Market Composite Index, which measures mortgage loan application volume, shows the number of people applying to refinance their mortgage surged, climbing 25.6% while the purchase index fell 14.1% for the week ending January 9, 2009.

According to Quicken Loans Chief Economist Bob Walters, mortgage activity is poised for a sustained rally.

“Mortgage activity remains very strong, thanks primarily to historically low long-term interest rates,” Walters said. “Leading up to the recent application boom, we had seen demand driven by necessity – such as homeowners needing to refinance out of ARMs that were set to adjust higher. However, the latest boom is being led by consumers who may have been in good loans, but are looking to cut their rates, or payments, even further.

“Because of this, and the sheer number of people who stand to save considerably by refinancing their mortgages, I would expect this surge in activity to continue for a very long time.”

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low mortgage interest rates

How the Fed Rate Cut Affects Mortgage Rates

Last year, we wrote an article – Does the Fed Rate Cut Affect Your Mortgage Rate?, where we outlined how the Fed Funds Rate, as part of the larger economy and economic markets, can affect mortgage interest rates.

This week, the Federal Reserve (the Fed) lowered the Fed Funds Rate to 0.25% – its lowest in history (and even zero in some cases). This has been like a defibrillator to the sluggish economy, shocking some life into the markets and spurring economic activity.

Fixed-rate mortgage rates, though not directly tied to the Fed Funds Rate, responded positively to the Fed Funds Rate cut and dropped very low yesterday. “How low did they drop?” Good question. Mortgage rates actually dropped to levels near historic lows. And they’ve stayed low.

Just as an overview, the Fed Funds Rate has a strong (if not direct) affect on the following:

• credit card rates
• adjustable-rate mortgages
• interest on savings accounts
• Prime Rate (home equity lines are based on this)

While it doesn’t have a direct affect on long-term interest rates (such as 30-year mortgage), the affect it has on the financial markets overall can influence long term rates, which is what we saw yesterday.

So, if you are considering refinancing or purchasing a home, now is the time. With rates at these levels, you’ll enjoy more house or mortgage for the same payment. Just lowering your rate 1% on a typical $200,000 mortgage can save you about $125 a month or $45,360 for the life of your loan. That is some money to put in the bank, folks.

Taking advantage of the market may seem like a no-brainer, because it probably is. If you can lower your payment, why not? If you can put money back in your pocket that you were previously putting in your mortgage, why not? If you can lower your mortgage rate by just 1% (see financial reasons to do so above), why not? Do you need more reasons?

And don’t forget, housing prices are at the lowest they’ve been in generations. The opportunity to purchase a home with a low price and low rate is unprecedented. Real estate investors who do their homework and invest wisely can also get deals they couldn’t have even dreamed about just a few years ago.

Thanks to the Fed Funds Rate dropping to the lowest level in history, mortgage rates have also dropped. No one is sure how long they will stay low. Get in touch with a mortgage professional to see if you can benefit from the current low rates. Waiting may be one of the costliest decisions you’ve ever made!

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low mortgage interest rates

Federal Reserve Slashes Fed Funds Rate to Historic Low

Confronted by a continued weakening economy, the Federal Open Market Committee (FOMC, Fed) cut its target Fed Funds rate to a target range of 0 to .25%, its lowest level ever.

The cut, which was widely expected, is likely to be the last the Fed undertakes, as it now looks to other means for injecting cash into our economy, and more specifically, the banking industry.

Quicken Loans Chief Economist, Bob Walters, says today’s cut will not likely impact today’s already low mortgage interest rates.

“Today’s Fed Funds action was largely symbolic, and is likely to have little or no lasting impact on rates. The financial markets have anticipated this cut for several weeks, and already priced it in to current mortgage rates – which continue to hover near historic lows.

“Going forward, the Fed may find itself in the precarious position of having to experiment with non-traditional methods to kick-start the economy and free up the liquidity in the financial markets to get banks lending again.”

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