Interest Rates Motivate Refinancing Over Buying
The Mortgage Bank Association reports that loan applications went up by 23% last week. This is an overwhelming increase but it does not come as a surprise considering the extremely low interest rates. The rates are at a record low of close to 3% on a 30-year fixed mortgage, in most cases. In 1981, rates were typically closer to 20%! While these rates are favorable to buyers, the group that’s taking the most advantage of the situation are current homeowners hoping to refinance. According to the MBA “the vast majority of the applications — 82.2% — were to refinance existing loans rather than purchase new ones”. Experts agree that while these conditions can be taken advantage of by both groups, the low rates can deter prospective buyers who are waiting in the hopes that rates will decrease even further. It may take an increase in rates to get those that are on the fence to take action- they wouldn’t want to miss out before they climb too far back up, even if higher rates do indicate an improvement in the economy.
If you’ve been considering buying, also be aware that you’ll be competing with investors who are out there taking advantage of low home prices and paying with cash.
Buyers and homeowners alike still have to qualify in able to benefit from low interest rates, which has not been easy in the past couple years. However, distressed homeowners are expected to find hope when the Obama administration changes the rules for the Home Affordable Refinance Program so that many more people will qualify for a refinance. Stay tuned for further updates on changes to the program!
Courtesy of CNN Money and Mecury News









