The Federal Reserve announced on Thursday that as part of its exit strategy to begin normalization of the economy it will raise interest rates on short-term loans to banks. This had the effect of sending stocks across the world tumbling. It also brought fears that mortgage rates may also increase.
Though mortgage rates are at record lows, the Federal Reserve’s recent actions point to a change in its policy of buying up all of Fannie and Freddie’s mortgage-backed securities. This has kept mortgage rates artificially low. It has also, however, helped homeowners riddled with mortgage payments and increasing debt.
The Fed’s move came as a surprise to many. The financial system is still treading on eggshells. The blow of the credit fiasco has left a large mark on the sector that will be difficult to recover from. While it will not have a direct effect on home mortgages, auto loans, or credit card rates, the stock market is already reacting.
Current Mortgage Rates
This week, mortgage rates continued to drop for the second week in a row. This is a sign of a recovering housing market. According to the National Association of Realtors, home sales actually rose last year especially in the third quarter.
The 30-year fixed-rate mortgage averaged at 4.93 percent this week, down from last week’s 4.97 percent average. The 15-year fixed-rate mortgage also dropped from 4.34 percent to 4.33 percent this week. Adjustable rate mortgages followed suit with the 5/1 ARM down to 4.12 percent and the 1-year ARM at 4.33 percent.
For those homeowners still plagued with mortgage debt, Obama announced today a new plan to assist homeowners. A total of $1.5 billion will be dedicated to the cause. It is intended to prevent further foreclosures.
Written by Lani Shadduck
HULIQ.com
Source:Nytimes.com; marketwatch.com
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