Home mortgage: U.S. rates climb from record low

Last week saw the launch of America’s lowest interest rates and its climb too! The borrowings increased to their highest rates of the month. A thirty year loan with a fixed interest rate of 5.12% was the rate in the week ending 22nd January. This was a climb from the 4.96% prevalent in the week before. This was the lowest rate since forty years. These low rates have increased refinancings of existing loans.

Data that was released in the week by Mortgage Bankers Association portray an up swing in the rates. A 0.35 % increase from the lowest rate has been recorded in the week. The data went onto describe the increase in demand for refinancing which was a huge 83% of the mortgage applications received. The re4cord high was however set the previous week with 4.96% as interest rate.

If the rates remain low for a prolonged period then in no time people would start borrowing for homes and the housing market would be on a high once again. The low rates would encourage buyers to try their luck again. The new government that came into power last week has adopted cutting rates as its tool to bring the housing market to life. The interest rates have fallen more than one percent point from a couple of months ago. The new government has started its actions with the aim of reducing costs of borrowing so that housing market gets a new lease of life and is rejuvenated.

The fall of the housing market is the greatest economic slowdown since the Great Depression. The increase in unemployment, which is the highest, observed in sixteen years; and decline in home prices have led to the paralysis of potential home owners. This slow down is the biggest slowdown that is faced by the new government that took charge last week.

As a remedial measure, the federal agencies and policy makers have introduced a reduction in interest rates in order to attract borrowers who would be willing to refinance their existing loans. Refinancing is the best method to pump money into the housing economy and lenders are anxiously waiting for this to happen. The problem that is cropping up for borrowers who are willing to take the plunge is stricter rules of qualifications and eligibilities. Thus where the common home owner does not have home equity due to lowering of value of property and has low credit scores due to defaults, there is no ways where he can avail this loan with low interest rate. Thus there is a need for relaxation of rules so that this benefit reaches the most needy. This explains an eight year low rate of applications for buying homes.

The Fed is buying mortgage bonds and would continue up to $500 billion from Fannie Mae and Freddie Mac. They have purchased notes worth $100 billion from Federal Home Loan Banks, Freddie and Fannie. The government is trying its level best and hope is on the cards for the housing market of America.