There were some fears a few weeks ago that the mortgage rates might skyrocket once the Feds removed its support of mortgage-backed securities and once the first-time homebuyers tax credit expired. Both of those events have now occurred and today’s mortgage rates are still hovering around record lows.
Of course, the homebuyer’s tax credit just expired this past weekend so it is still too early to say what is going to happen with rates. As of right now, however, they are still around five percent.
According to the Mortgage Bankers Association, interest rates for mortgages increased by about .04 percent last week. That’s a small increase compared to some of the predictions that were being propagated by those in and outside of the industry. A study of ten major housing markets across the nation shows that very little has changed in terms of mortgage rates and other housing market factors in the last month. That’s about the time when the government removed support of mortgage-backed securities. Earlier this week, the Feds promised to keep the mortgage rates around what they are right now for awhile in order to make a positive impact on the struggling American economy.
The two day meeting with the federal open market committee came to the conclusion that keeping the main interest rates between zero and 0.25 percent (which they have been at since December) would help the American economy stabilize. This decision comes as the housing industry is getting ready to enter its busiest buying season of the year.
The end of the homebuyer tax credit also played a role in increasing home sales in March. Purchase applications increased by about 9 percent for the month of March as homebuyers were rushing to meet the deadline and take advantage of the significant tax advantages of buying a new home before April 1. In addition to that, government applications for buying a new home accounted for nearly half of all purchase applications during the last week of April.
According to policymakers, the American economy is gaining momentum and beginning to make a comeback. Consumer spending is going up and more people are applying for home loans. However, there are still millions of homeowners who are unable to pay their mortgage loans lately which still points to a very troubled housing market. The falling prices of homes are contributing to the problem as well as increasing unemployment levels across the nation. We are starting to make a turnaround in some aspects of the economy, but we still have a long way to go to get back to where we were five or ten years ago.