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Hope Still Exists for mortgages in 2007

Posted by  on Apr 16, 2009
 
Home loans are subject to general market ups and downs, just like all financial concerns. The Federal Reserve is liable for overseeing the United States’ economic health and especially interest rates. Home loans are a good way to test market waters.

It is believed that the United States’ housing market will perform much better during the second half of 2007, unless employment drops or the Federal Reserve is compelled to boost interest rates. It is believed that home sales and single family home construction to take an upturn by mid-year. Home sales and home loans were on a five-year marathon, until recently. Home sales and prices in many regions dropped last year and could deteriorate for several more months before showing more signs of life.

There are forecasts that the Federal Reserve will keep interest rates unchanged, or even lower them later in 2007 to stimulate the economy. This may stimulate the economy but it will lead to decreased home sales.

Potential home loan borrowers should continue to be stimulated by low mortgage rates, low house prices and increased family income. So long as these remain constant, conditions will remain stable and improve for potential home owners. Mortgage rates fell by more than half a point from July through December, job creation has grown and home prices steadied or fell.

Unfortunately, borrowers with blemished credit histories that took out loans with low teaser rates will soon face much higher payments when those mortgages reset. That could push more inventories of homes on to the market and possibly drag down prices. Luckily, employment rebounded the last four months of 2006. That will continue to support the housing market in 2007 unless there is some shock to the economy.

It is helpful to know that there is a choice of rates and the rates are very similar from one lender to the next. On volatile days, there may be revisions to the rate sheets. There have been times when rate sheets were revised more than five times in one day. These rate sheets are not designed for public view. They are for loan officers' eyes only because they represent the cost of a loan to the loan officer, not the cost to the borrower.

Interest rates are on the rise. The yield on the 10-year Treasury-bond yield zoomed past the 5 percent mark. This is its highest level in four years. It's not just bond traders who should care. Rising rates will have an effect on your finances especially if you own a home or are shopping for one.

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