The 2 most frequent questions I am asked by prospective borrowers are what is your rate and where do I think mortgage rates are going? Because interest rates are a constantly moving commodity, my answer today may not hold true tomorrow. My best indicator of future mortgage rates is to look at the past.
When unemployment figures where high, housing prices low, and a general lack in confidence by the American public, mortgage rates have been traditionally low as they were post 9/11. Interest rates in the low 5% range at that time helped restore both the housing and job markets.
Today we are faced with a similar situation, with global tensions, a battered economy, high unemployment and a general lack of confidence. My prediction is for mortgage interest rates to move upward over the next 6 to 12 months, albeit at a much slower pace than in the past. New housing starts in the month of June have risen dramatically and in many parts of the country unemployment figures are starting to level off.
Good news traditionally has led to higher mortgage rates. Recently General Motors has come out of Bankruptcy, Bank of America and Goldman Sachs reported billion dollar 1st quarter profits. A healthy job market will lead to increased spending and thus, we will see higher rates.
I believe that with higher mortgage rates we will see a loosening of credit by the lending institutions. Today we see multiple tiers of mortgage pricing based on the borrowers FICO score. Minimum down payments on investor properties and maximum loan limits on condominiums will loosen as mortgage rates increase and the demand for this product grows.
A slow and steady recovery from our current economic crisis will lead itself to the return of normalized mortgage rates. Over the last 25 years rates have traditionally been around 6% for conventional 30 year fixed rate mortgages, give or take 3/8% plus or minus. Our economy has done well at this level.
Remember, look to the past to see the future of mortgage rates. As they say history tends to repeat itself.
By Gregory J. Greco Jr.
The Mortgage Team
Aequor Funding Corp.
Tel: 732-650-8696
www.aequorfunding.com
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