Mortgage rates have been at or close to historical low levels for the past two months, but that hasn't translated into a flood of home sales. They have, however, encouraged many borrowers to refinance existing mortgages.
According to Zillow's weekly mortgage rates survey, the average rate on a 30 year fixed mortgage was 4.14% last week and the average rate on a 15 year fixed mortgage was 3.6%. A five -to-one year adjustable rate mortgages was 3.01%.
The Mortgage Bankers Association (MBA) says these levels aren't going to be around much longer. The group issued its economic forecast at its annual convention in
Another "quantitative easing" by the Federal Reserve could keep rates low a little longer but if you're looking to refinance or get a new mortgage, you probably shouldn't wait too long.
The chief economists of the MBA, Jay Brinkmann, says rates on the 30-year fixed-rate mortgage will begin rising next month and average 4.4% in the fourth quarter of 2010, increasing to a 4.7% average in the first quarter of 2011. He expects it to climb to 5.1% by the end of next year.
Brinkmann adds the only thing that could change his forecast is if the Federal Reserve makes come kind of "blockbuster" announcement beyond the expected purchase of Treasury securities. He also said that there has been a large decline in household formation because many adults who would rather live on their own can't afford to and are instead sharing a roof with their parents or roommates.
At the conference, many mortgage bankers said business was doing well due to the high volume of refinancing. But they were concerned that this would disappear if rates went up. Total mortgage volume is expected to be nearly $1 trillion in 2011, which is down from an anticipated $1.4 trillion this year and half of the nearly $2 trillion in 2009.
Meanwhile, you need to be wary of advertising that promises lower rates because they only apply to borrowers with superb credit and pass a number of other criteria.
Throughout the year, Freddie Mac has reported average mortgage rates in the 4 to 5% range. At the same time, some lenders have been pitching fixed rates as low as 3%.
They're able to do this because the advertised mortgage rates are based on the best possible conditions, which appear in the fine print at the bottom of the ad. These conditions include a minimum credit score of 740; a loan of no more than $350,000, a maximum loan-to-value of 60% or 80%; a 30-day rate lock; and the establishment of an impound account taxes and insurance
If you don't meet all of these factors your rate will probably be higher than the advertised rate. Lenders may also make adjustments based on details behind the above factors. Take the credit score, for example. Lenders will review the amount of debt you have and your required debt payments. They'll also analyze how frequently you open new accounts, and the amount of credit you use relative to what's available.
These advertised mortgage rates can still be helpful even if you don't qualify. You can use them to compare rates between lenders to see which one appears to have more competitive offerings. You may also stumble upon rates that reflect your situation. So don't disregard a lender just because their rate looks higher than others you've seen. Those other rates may not be available to you.
