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Predictions For Mortgage Interest Rates For 2010

Predictions For Mortgage Interest Rates For 2010

It goes without saying that the economy, including all activities in the financial sector

, are rather volatile at the moment. This makes accurate predictions difficult to make. We at Krebs Financial have access to the information and analytical resources which give us some confidence in the following prediction about what mortgage interest rates will look like over the following year.

Early in 2009, a standard fixed-rate 30-year mortgage carried an interest rate of about 4.69%. This stood out as one of the all-time record lows for mortgage interest rates. Such a low rate in the market was seen as an opportunity by home owners, and stimulated a wave of refinancing and loan modifications. Financial institutions quickly realized that they were losing control over the situation and began taking steps to avoid allowing the entire body of mortgage loans in execution to be renegotiated en masse to a point where it was no longer viable to operate. Even the amount of paperwork required for all of these loans was becoming a problem for operation costs. As a result, an increase of 0.5% in mortgage interest rates took effect in order to offset these costs and tendencies. The increase was planned for some time and finally took effect in May of 2009, in the hope that a slight increase would allow the trend of growth to continue in financing and refinancing, but also help banks remain solvent.

Since then, this rate has remained relatively stable. It has allowed struggling homeowners to continue refinancing their homes with better terms, and has slowed the rate at which homes with healthy finances have renegotiated their terms. The resulting interest rate of 5.19% for mortgages, seemed to establish a healthy equilibrium. Since then, a healthy growth in the home financing market has continued.

Our prediction for 2010 is as follows: The newfound stability in the housing market is one of the first, and one of the most important, signs of progress in a recovering economy. We expect that interest rates and loan terms will remain stable for most of 2010. Banks, financial institutions, the Fed, and the government all realize that this recovery will need some time in order to trickle through to other sectors. This will mean banks will be slow to even consider raising interest rates.

by: DavidAKrebs
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Predictions For Mortgage Interest Rates For 2010