Mortgage Rate Instability

There is a lot happening in the mortgage industry today. This week U.S. mortgage rates edged slightly higher, veering away from all time lows that have held precedent lately. Total Mortgage Services wrote a great article on the rising mortgage rates and the article proves to be a great read for anyone interested in the mortgage industry. At the same time, Europe faces a large amount of economic instability, causing the mortgage industry to take a step back and be more cautious about writing loans. Bloomberg's report on the U.K. mortgage economy describes what is happening very well.
To sum up the two articles, mortgage rates in the united states are beginning to see an increase from their all time lows recently experience. Rates are increasing as lenders begin to see a recovery in the housing market. This recovery has been stimulated vigorously by low mortgage rates, as well as a loss of confidence in the stock market due to European woes. People are flocking to houses as an investment as opposed to keeping their money locked up on the stock market. This is a great sign for the mortgage and housing industry as it signals a return in confidence not seen since the crash of the housing market in 2008. But with rates increasing and still more economic distress to come, what is the best move to make?
Clearly in England for the banks the best move to make involves cutting the number of mortgage loans written. In the article by Bloomberg, the number of approved mortgage loans fell by 18% this past month. That number is staggering and comes on the tails of weak economic numbers and an overall negative outlook of the Eurozone economy. Clearly lenders in Europe foresee some turmoil in the housing market and have decreased their risk by writing less mortgage loans.
As for an individual living in the United States, rates are extremely low, housing prices still have not recovered fully, and the stock market is volatile. If you have the ability to invest in housing, now is the time to do it before the credit markets tighten up and the rates increase. There are many types of mortgage loans out their to satisfy any investment needs so really consider giving a housing investment a thorough look right now. I will inform you in another daily post if the situation changes.

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Housing Recovery?

Mortgage Rates have fallen to a record low. USA Today wrote a great article about the effects that the low mortgage rates are having on the housing market. The idea is that low mortgage rates will be extremely beneficial to the economy in three ways.
The first way involves the refinancing portion. Refinancing to lower rates allows current homeowners to spend less money each month on their mortgage payment. This causes an effect where the homeowner has more disposable income, feels richer, then spends the money stimulating growth. In this aspect the low mortgage rates will be very beneficial to our economy as a whole.
The refinancing alone though will not influence the mortgage economy as much as the fact that low mortgage rates make investing in properties more profitable and allow people to buy and sell houses much more easily. Whenever houses are bought or sold it has a very influential effect on the economy because people invest money in fixing up there home. With more money to spend and increased real estate investment, the overall housing economy should see some growth. Remember that right now the housing market is at a relative bottom. So any growth at all is a huge positive, it signifies the emerging from a valley.
The third way low mortgage rates will benefit the economy involves stimulating the lending environment generating money for the banks and lenders that will be further put back into the economy. The cycle of lending needs to be continuous and ongoing in order for the economy to revert back to fully functioning. Without lending our economy will again come to a standstill.
In these ways all signs point to a recovering housing market. But let's take a look at some externals that will factor in. The jobs reports are bleak, the financial bailout did not work as intended, Europe is in financial chaos, and the middle east is in unrest.
If the jobs reports show high unemployment that means a lower number of people are in the total population of people able to buy a house. Without employment you cannot get a mortgage loan. This has a very negative effect on the mortgage and housing industry.
The financial bailout has cause the United States to be in a massive amount of debt. The only feasible move for the U.S. Government to make is to raise taxes to overcome the debt. The increased taxes will cause people to have less money and will cause the growth in the economy to slow.
Europe is in such unrest that financially every other country needs to be on guard against another recession because of how intrinsically linked our global financial markets are.
And finally the middle east, specifically Syria at the moment, is in unrest. With turmoil overseas the only option the United States have is increasing money spent on defense. This will affect other areas of the U.S. because less government investment will lead to crumbling infrastructure.
For now I would be very concerned with the housing recovery. Their are too many variables that could go very negatively.

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Backing up What I said Earlier about Mortgage Economy Slipping

Mortgage Economy Information

This article gives all the new home sales stats for the year past defined on July 25th, 2012.

Oddly enough, new home sales plummetted while median home sales prices also declined. Usually when home prices decline home sales go up, but with all the information about the current mortgage economy I blogged about earlier, this isn't a surprise. The big surprise comes from the fact that home supply is near a record low. Median prices of homes shouldn't be falling if demands for home is high from the low supply of homes. Right now all the financial data is pointing to some ill signs.

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Current Mortgage Economy

Bleak. The current mortgage economy is bleak. With consumer spending down across the board, decline in growth in China and a recession looming in Europe, the mortgage industry does not look like it will recover anytime soon. People can't afford to spend money buying houses at this point in time due to the negative strain recession will put on their income, as well as fear of loosing jobs due to the impeding economic recession. The housing market is up a little bit with home prices creeping higher, but overall the housing market still has not recovered from three or four years ago when prices were extremely inflated and the market crashed.
The mortgage bankers association is a great place to get all your current economic information related to mortgages. You can find the current monthly forecasts and outlooks at Mortgage Bankers Association.

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Average Rates for April 24, 2010

Here is an update on the average mortgage rates for Saturday, April 24, 2010. All of these average rates also have points associated with them averaging out to around 1 points per loan. For more information about points and rates please visit our mortgage info section.

30 Year Fixed = 4.93%

20 Year Fixed = 4.83%

15 Year Fixed = 4.36%

3/1 ARM = 3.69%

5/1 ARM = 3.65%

7/1 ARM = 3.92%

10/1 ARM = 4.42%

Home Equity Loan - 10 Year = 4.09%

Home Equity Loan - 15 Year = 4.75%

Prime Rate = 3.25%

1 Year T-Bill = .400%

6 Month LIBOR = .418%

12 Month LIBOR = .963%

*These rates are based on current lender averages and do not reflect official market values and depend entirely upon the borrowers specific fiscal situation.

Introduction to Mortgage Rate Co.

Hello,

From henceforth I will be blogging everyday out of personal pleasure in order to help figure out this fiscal disaster called the Mortgage Crisis. Since late 2007 the mortgage industry has undergone a very tumultuous down swing due to bad lending practices and terrible risk assessment. Also the incentives for mortgage lenders at large mega-banks to write bad loans hasn't necessarily changed, and without reform of the system our population will quickly forget the troubles that occurred and in within a decade the same problem most likely will occur due to American greed.

The problem with the mortgage market isn't the original system that was established so people with the ability to repay a loan could buy a home younger and actual own the property so the money they put into builds equity and translates into personal wealth. Well with great rates and no regulation, the mortgage industry got soft and began writing massive amounts of loans to people that could not make payments, most often in cases where the homes were meant to be bought and then quickly sold at a profit. Well all the houses were overvalued and the people buying/selling the houses didn't have the ability to repay the loans, so when the house prices dropped because of the housing bubble bursting, lots of people had no way to repay loans. In the meantime all the companies writing loans bundled all the bad mortgages together into a financial derivative called CDOs or Collateralized Debt Obligations. When all the buyers/sellers defaulted on their loans the people who bought the "secure" CDOs lost billions of dollars, causing a huge cascading collapse of our financial system.

What will become of the mortgage industry next?

Current Mortgage Rates: 5%-7% for a 30 year fixed rate mortgage