Mortgage interest rates have held steady below five percent for some time now, hitting an all-time low of 4.71 percent in December 2009. The feds have kept rates down in attempts to boost economic recovery. So, how long can they hold off raising rates, what enabled interest rates to stay low and when will rates rise above five percent?
For some time now, the nation’s housing market has been experiencing a break when it comes to mortgage interest rates. Many homeowners decided to do a mortgage refinance based on low interest rates. Along with low interest rates providing an incentive to refinance, home sales were given a shot in the arm with the 2009 extension of the new home buyer's tax credit.
Home Buyer's Tax Credit Ending April 31st
Ending on April 31, 2010, however, the $1.25 trillion Federal Reserve program to purchase Fannie Mae and Freddie Mac mortgage-backed securities (MBS) will no longer hold the lid on mortgage interest rates. What does that mean for future mortgage notes? Five percent mortgage interest rates may no longer be a reality for certain new or mortgage refinance loans.
Monday through Wednesday of every week, Freddie Mac collects interest rate data from lenders throughout the nation. Interest rates typically fluctuate dramatically during any given trading day, and often follow suite with long-term Treasury bonds.
Mortgage Interest Rates On The Rise
According to Freddie Mac, 30-year fixed-rate mortgages jumped from the previous week’s average of 4.99 percent to 5.08 percent during the last week in March 2010. Rates are still below 5 percent for 15-year fixed mortgages, which climbed from 4.39 percent the previous week to a 4.39 average the end of March. Adjustable rate mortgages actually fell for one-year adjustable rate mortgages (ARMs) and five-year ARMs are still in the lower 4.0 percent for one- and five-year notes.
If you’re in the market for a home or mortgage refinance, and your credit score is in the 680 range or better, you may still find interest rates below five percent. Shop around with different lenders. Typically, if you make several inquiries within around a ten-day period, it will not impact your credit score, and you will have time to search for the best current rate available. Find out if you will be required to pay for private mortgage insurance (PMI). If so, you don’t have take what the lender offers. Instead, shop around for the best rates.
Not only will you want an interest rate quote over the phone, but ask for all fees associated with the loan. Lenders often charge a fee for their services, which they note on the Settlement Statement. Ask for, and be in possession of, all costs in writing before making a decision as to which lender you will use.
What to ask Mortgage Lenders
Not all mortgage lenders and their respective loans are created equal. If they are not known, research the reputations of the lenders you are considering to ensure you are working with reputable ones. Other questions to ask include how long the interest rate quote is good for; if there are early payment penalties or pre-payment penalties; and what are the conversion options if you are considering an ARM.
Once you receive all quoted interest rates, fees, and details regarding any prepayment penalties or conversion options in writing, you’ll be ready to make your decision regarding which lender can provide you with the best mortgage for your situation.