Mortgage Informer

With mortgage rates hovering around the 5% mark, it is still advantageous to purchase a home. These rates will begin to rise as the Federal Reserve begins to withdraw excess liquidity from the economy, which they will have to do in the near future. This will lead to increased mortgage rates. The only situation that homeowners should be aware of is that the home they are interested in, is not located in an area where home prices still have more downside.

5% Still An Excellent Rate

Do not expect rates to drop below 5% anytime soon, perhaps for years to come. Should you find the home of your choice, this interest rate is more than reasonable. You will be locked into a rate for 30 years which will not change, aside from the inevitable rise in insurance rates and taxes. Especially taxes, since the government is running a massive deficit and the national debt is ballooning. This should be taken into account when deciding how much money is available for a home.

Problems In The Housing Market

There are still persistent factors affecting the housing market. Though the interest rates are now at reasonable numbers, the unemployment problem is cutting into those who were interested in purchasing a home in the past (now they are unemployed). The banks have also instituted more stringent criteria for giving a loan. No more of these less than 20% down and no income check loans. This will lessen the number of people who would love to purchase a home at the low home prices and interest rates.

When the home buyer incentives end in the spring, this too will cut into the demand for homes. The precarious economic conditions that exist are not conducive to home buying. Without a Federal stimulus directed to housing, the home sales will be flat. In addition, Federal tightening of the money supply will lead to higher interest rates which will also put a damper on home buying.

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Tags: Mortgage Rates