Near-Best Mortgage Rates to Remain for Years?

Posted by  on Oct 12, 2010

Best Mortgage Rates Still in Sight

Until recently, the collective wisdom among economists was that we should by now have bade a fond farewell to the lowest mortgage rates in recent history. They thought, almost unanimously, that today we would be watching those rates climb slowly but inexorably.

It's not turned out that way, and the recent trend--according to Freddie Mac and just about all other sources--has been downwards. In fact, we may well see a new low very soon.

Low Rates for Years to Come?

Now one economist is forecasting low rates for many years to come. Writing June 1 in the London Times (the newspaper of which he used to be economics editor), Anatole Kaletsky said:

...short-term interest rates will almost certainly remain near zero until the spring of 2011 in all the leading economies -- and once monetary policy does start being tightened, central banks will move extremely slowly, with interest rates unlikely to rise above 2 percent before the second half of the decade.

In other words, Mr. Kaletsky thinks that interest rates generally (and, presumably, mortgage rates) could edge up by only a couple of percent between now and 2015 or perhaps even beyond.

Current Mortgage Rates Low? Who Cares?

The New York Times highlighted May 31 a group who must regard current mortgage rates with supreme indifference. They are the growing band of home owners who stop making their monthly payments, yet remain resident in their houses.

The Times quoted LPS Applied Analytics, a specialist company that publishes a monthly report on the mortgage industry, as saying that "the average borrower in foreclosure has been delinquent for 438 days before actually being evicted." That compares with 251 days in January 2008 when, one assumes, lenders and courts alike were less overwhelmed by the sheer number of defaults.

Interestingly, those Times readers who commented on the piece seemed to divide neatly (and fairly evenly) between those who regarded the refuseniks as deadbeats, and those who thought the lenders had it coming to them.

Mortgages Easier to Obtain

Another New York Times report recently revealed that it's slowly becoming easier to obtain again private mortgage insurance. Until recently, borrowers who had a down payment of less than 20% of the purchase price were pretty much obliged to insure their loans through the Federal Housing Administration (FHA) because private insurers had effectively withdrawn from the market.

Don't get too excited yet about the opportunities that the return of private insurers may offer. The Times says that monthly repayments with private mortgage insurance are often higher than those insured through the FHA program.

You could, however, get excited about the exceptionally attractive home loan deals that are currently available. If you do, be sure to compare mortgage rates here.


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