Mortgage interest rates have dropped to historically low levels recently. In fact, it is rumored that the Department of Treasury may drop the rates to under 5 percent for consumers purchasing homes. Although there are no rumors yet of offering those rates to those planning to refinance their homes, the consideration of such a proposal is an indication of how bad the real estate market has become. Some economists hope that lower rates and the recent drop in prices will encourage prospective buyers to purchase now, thus breathing some much needed life back into the real estate sector. Others feel that offering lower rates to prospective buyers may not provide the desired boost. Buyers are still unsure about jumping into the real estate market before it has hit the bottom. Low rates may not be enough, when many are apprehensive due to their decreased investment portfolios and job insecurity.
Much of the media focus seems to be how to get buyers to start chipping away at the large inventory of houses sitting on the market. There is not, however, much talk about the majority of homeowners in this country. There are plenty of homeowners that pay their mortgages and have equity in their homes. A good number of those mortgage holders would want to refinance their existing mortgages if they were offered low rates. The glut of current home inventory would not be made worse by home owners who refinance. Homeowners who refinance usually do so to save money on their mortgage payments. The more money those consumers save, the more likely they are to make improvements to their homes and put money into the economy via retail and services. Rates for refinance should be included in any government proposal to stimulate the real estate market. A stimulus plan that only focuses on home buyers misses a chance to encourage current homeowners to help kick start the sluggish real estate sector. Homeowners approved for a refinance usually have excellent payment histories, good credit scores and are an asset to the economy.
A good number of consumers looking to refinance are not willing to risk that the rates increase. A report from the Mortgage Bankers Association indicated a 200 percent increase for refinance applications the last week of November. Unfortunately, fewer applications are being approved. Lending standards have become more restrictive and home values have decreased, which has made it difficult for some consumers to refinance. If a consumer purchased a home at the height of the boom and then saw his house value decline, he may no longer have enough equity to be approved for the refinance. On the other hand, those who do have enough equity for a refinance, should consider locking in the low rates now. This may be a once in a lifetime opportunity.
Much of the media focus seems to be how to get buyers to start chipping away at the large inventory of houses sitting on the market. There is not, however, much talk about the majority of homeowners in this country. There are plenty of homeowners that pay their mortgages and have equity in their homes. A good number of those mortgage holders would want to refinance their existing mortgages if they were offered low rates. The glut of current home inventory would not be made worse by home owners who refinance. Homeowners who refinance usually do so to save money on their mortgage payments. The more money those consumers save, the more likely they are to make improvements to their homes and put money into the economy via retail and services. Rates for refinance should be included in any government proposal to stimulate the real estate market. A stimulus plan that only focuses on home buyers misses a chance to encourage current homeowners to help kick start the sluggish real estate sector. Homeowners approved for a refinance usually have excellent payment histories, good credit scores and are an asset to the economy.
A good number of consumers looking to refinance are not willing to risk that the rates increase. A report from the Mortgage Bankers Association indicated a 200 percent increase for refinance applications the last week of November. Unfortunately, fewer applications are being approved. Lending standards have become more restrictive and home values have decreased, which has made it difficult for some consumers to refinance. If a consumer purchased a home at the height of the boom and then saw his house value decline, he may no longer have enough equity to be approved for the refinance. On the other hand, those who do have enough equity for a refinance, should consider locking in the low rates now. This may be a once in a lifetime opportunity.
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