December 22, 2009
December 22, 2009 by admin
Mortgage rates are moving up sharply to finish the month of December. Interest rates for thirty year mortgage loans have gained well over .375% during the past thirty days as the bond market has seen a sharp rise with yields. Treasury yields, surged past 3.5% late last week as they surpassed the sixty day ceiling and quickly set eyes for a target of 4%. Most national mortgage lenders are now offering thirty year home loans at 5.25%, a historically great interest rate, but up sharply during the past month. The rate for fixed fifteen year mortgage loans remains in the high four percent ranges, but the momentum is quickly driving long term rates to move higher.
The stock market has held relatively steady over the past two weeks. Economic news continues to send mixed messages as to the speed the economy is likely to recover in 2010. There remains little doubt that the global economy has turned the corner, the larger question become will the recovery be a V shape or a U shape. Today investors and economists had the opportunity to review critical economic reports. The first major report of the day was the revision downward of third quarter GDP. The rate of growth for the economy was lowered from three percent down to two percent. This had the potential to derail the market, but the existing home sales report for the month of November was released later in the morning, showing a surge of nearly eight percent with existing homes sales last month. The real estate market continues to offer a ray of hope as home sales have been better than expected almost every month since June. The month of November was a strong recipient of buyers who rushed to lock in contracts prior to the end of month tax rebate deadline, which was later extended into early 2010. In addition, buyers benefitted from a drop in long term rates in early November as fixed mortgage rates flirted below five percent for both thirty and fifteen year loan terms. The real estate market has been showing signals of a recovery, but there remains a large gap in keeping homeowners in their properties and avoiding bank foreclosures. To date the governments push for refinancing and home loan modifications has had little success in helping to slow down the rate of bank repossessions. CNBC featured a great interview with financial expert, Suze Orman, who was pushing for the government and banking industry to apply a universal principle balance reduction, lowering mortgage balances inline with today’s market valuations. This universal approach would not discriminate against homeowners who have continued to pay their mortgage on time and would work towards reducing the possibility of homeowners from simply walking away from upside down real estate investments. To date, most lenders have shied away from the forbearance concept of addressing the mortgage crisis. This approach if adopted would have a wide appeal to everyone except the mortgage companies as it would be a fair system that benefits property owners who have maintained their payments, despite a record drop to their net worth through there home value deterioration.