Lower Mortgage Rates Bring January Thaw
Mid-January news stories brought some rays of sunshine into the mortgage and housing markets:
- Lower interest rates spurred a resurgence in mortgage application activity
- A new survey indicated a likelihood of stability for most housing markets over the next two years
- Financial institutions are responding to demand by increasing mortgage counseling services
This wave of stories included some good news for homeowners and new buyers alike, but perhaps should be best received by existing mortgage holders.
Lower Rates Spur Mortgage Activity
A prominent index of mortgage application activity reached its highest level since April of 2004. The reason why mortgage application activity has heated up is that mortgage interest rates dropped significantly in the second half of 2007, and continued their downward march into January of 2008. By mid-January, mortgage rates were at lows not seen since July of 2005.
Lower mortgage rates spur both demand for new home purchases and interest in refinancing, and both types of activity showed strong increases in the recent report. For prospective buyers, lower rates allow the same monthly mortgage payment to finance a higher-priced house, and for some buyers this can make the difference between getting into the market or not.
Meanwhile, for many existing mortgage holders, lower rates represent an immediate opportunity to save money. With mortgage rates having been at higher levels over the past two years, there are many homeowners with recent mortgages who can now lower their monthly payments. An increase of nearly 75% in the refinancing index over the past year shows that mortgage holders are responding enthusiastically to this incentive.
Chances Look Good for Most Housing Markets
Meanwhile, a forecast of housing prices over the next 24 months by mortgage insurer PMI Group suggested that problems in the housing market may be more isolated than many people think. Fully 37 of the top 50 metropolitan-area housing markets are forecast to have a better than 50/50 chance of stable or rising prices over the next two years.
The fear of falling prices can make new buyers hesitant to enter the housing market, but this new study indicates that this deterrent should not apply in most markets.
Most Mortgage Problems are Fixable
Finally, the renewed emphasis on mortgage counseling was a reminder that most mortgage problems are fixable. Foreclosure is not the only option for homeowners who are coming up a little short of meeting their monthly payments, and certainly, mortgage companies would rather work something out than be stuck with a default. In many cases, some restructuring or refinancing of the debt can make all the difference.
The effectiveness of mortgage counseling ties into the two previous storylines — with lower interest rates and stable housing markets, mortgage counselors have more tools at their disposal for helping people make their mortgages affordable again.
Keeping a Finger on the Pulse
Changes in mortgage rates and other housing news have been dramatic and fast-moving. Homeowners and prospective buyers can keep a finger on the pulse of this market by bookmarking mortgage information on the internet. This will allow them to keep tabs on mortgage rates, get quotes from lenders, and stay abreast of other housing news. In this climate, that news can affect consumers very quickly.
Tags: housing prices, interest rates, mortgage, mortgage application, mortgage counseling, mortgage rates, refinancing
