Mortgage Rate Trends

Mortgage rates have always been very sensitive to the general economic environment, mirroring what is going on with the economic health of the country. For many, many years, (before the current poor world economic situation), mortgage rate trends have seen a slow reduction followed by long periods of stability; but that was bought to an end by the sub-prime mortgage revelations, and the following worsening economic situation, which has since led to an economic slump in worldwide commerce.

The last year, in terms of 30 year fixed rate mortgages, has seen the rate drift slowly lower from a high of 6.8% in late August of 2008, down to it’s lowest point in early April 2009 of 4.8%. Since then, mortgage rate trends leveled out over the next two months, but in late May, they started an inexorable rise to where they now sit (in early June), at 5.64%

Mortgages are just like any other commercial product on the market today in as much as they respond to the law of supply and demand. When the demand is high and generally exceeds the supply, or the availability of funds, the propensity is for mortgage rate trends to begin to climb. This is a way of trying to deter further demand and basically means that only the more wealthy (or sometimes perhaps the more desperate) are able to obtain a mortgage. The converse is therefore also true, that when supply exceeds demand (and this is what has happened generally over the last twelve months), the rate drops in order to try and stimulate demand back up again.

Mortgage rate trends are of vital importance to some people more so than others. Naturally anyone who has a mortgage is affected by changes in the interest rate, unless of course you have a fixed rate term mortgage. In the case of fixed term mortgages, the obvious critical point is when the end of the fixed rate period is approached. If the rate has come down in the ensuing period since the fixed term began, this is good news for the borrower, as their repayments will settle at the lower interest rate once the fixed term is over. On the other hand of course, if the rate has gone up, the borrower could be in for a shock as the new repayment will reflect the increase in the interest rate.

of course, if the rate has gone up, the borrower could be in for a shock as the new repayment will reflect the increase in the interest rate.

But for those of us who are on a variable rate mortgage, our payments will go up and down with the rise and fall of the interest rates. So to many people, mortgage rate trends are something to be monitored very carefully. The poor economic climate of late has made this even more important as earnings have decreased in some instances, or people have actually lost their jobs and of course their main income streams.

Mortgage rate trends do tend to follow the country’s main bank interest rates, so the banks and the government have a responsibility to try and ensure that people can afford to carry on repaying their mortgages. The sad truth is that many people who became overstretched financially have lost their properties as their mortgage companies have foreclosed on them and repossessed their homes.

As I was writing the above article, it struck me that you may be interested in reading this too: I hope you find it useful when to refinance and mortgage amortization schedule

Mortgage Rate Trends

mortgage interest rate trends

Mortgage Rate Trends

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