Continuing low mortgage rates don't guarantee affordable housing

Posted by  on Nov 18, 2014

Average rates for fixed-rate mortgages (FRMs) held steady last week, according to HSH.com. On November 14, the 30-year version rate stood at 4.10 percent with points of 0.13 (down from 0.14 the previous week), while the rate for the 15-year version was 3.39 percent with points unchanged at 0.10. Neither rate had moved at all compared to seven days' earlier.

Some adjustable-rate mortgages (ARMs) showed small changes, with the average for the 1/1 30-year ARM drifting down three basis points to 2.56 percent from 2.59 percent. Points for these rose to 0.16 from 0.15.

Our live database of current mortgage rates can help you find the best mortgage rates in your area.

Wake-up call for first-time buyers

Your parents and grandparents would almost certainly be astounded that you can find home loans at last week's levels. True, there was a time recently when they were even lower, but that so far appears to have been an aberration. Trawl back through many decades of rate archives to the time when records began to be compiled, and you are going to discover just how exceptional (unique, except for that aberration) current and recent rates are.

Trawl through the rate forecasts of organizations such as Fannie Mae and the Mortgage Bankers Association (MBA), and you are going to see how likely it is these bargain home loans aren't going to last. According to figures published late in October, the MBA's economics team expects the 30-year FRM rate to average 5.0 percent across 2015, and 5.4 percent the following year. For first-time buyers (and others -- including those wishing to refinance), the window of opportunity may be set to close soon.

More to housing affordability than mortgage rates

To make matters more urgent, new research published last week illustrates how getting onto the home-ownership ladder can become less affordable, even when current mortgage rates remain low. The National Association of Home Builders/Wells Fargo Housing Opportunity Index found that 61.8 percent of all homes sold between the beginning of July and the end of September were affordable to families on the U.S. median income of $63,900. That's down from the 62.6 percent of homes sold during the second quarter.

That's because housing affordability is determined by other factors besides rates. The median income and the average cost of homes are also important. And, when salaries increase, home prices tend to increase as well. That makes it even more crucial to prepare in advance before making a mortgage application. Maximizing your credit score, paying down other debt and seeking out a home you can comfortably afford all help to get you the best mortgage rates while increasing your chances of being approved.

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