RBI switched to a softer monetary policy by reducing its policy interest rates to boost economic activities and prevent the country from going into recession as few other western economies.
However, economic conditions have improved significantly over last few quarters and the capital flow in the system is good.
With the improvement in economic condition, many felt that RBI would exit its soft monetary policy and this would lead to increase in home loan rates. However, analysts are of the opinion that RBI would consider various factors before exiting its accommodative monetary policy since a premature withdrawal of the existing monetary policy might slowdown the pace of economic growth. However, a late exit might shoot up the inflation.
Some of the factors that may lead to a change in monetary policy in near to medium terms:
Macroeconomic and financial parameters
Since RBI has to manage the risks associated with inflation, fiscal consolidation and capital inflows, its decision to continue or exit the accommodative monetary policy depends on various factors associated with the risks.
Analysts feel that RBI's stance would primarily depend on macroeconomic and financial market conditions. Factors like strong aggregate demand and a well functioning domestic banking system will lead to gradual exit from low interest rate regime.
Analysts believe that the present rates would continue for some time and the central bank would not tamper with the rates until it is sure that tightening would not hinder economic growth and inflation would remain within control.
Source
Sunday, February 28, 2010
Monday, February 15, 2010
Pros and Cons of Home Improvement Credit Cards
People looking to start a home improvement project often wonder which are the best sources of financing. Many people turn to banks for a loan, however, most banks require you to have equity built up in your house in order to approve you for a loan. Plus, if your home improvement project is fairly small, the hassle of applying for a bank loan and the high fees typically charged for these loans may not be worth it.
For this reason, many people fall for the temptation to use a home improvement credit card to take out a short-term loan for purchasing the materials needed for their project. All the major hardware stores offer their own private label credit cards; for example, you can have your pick between a Home Depot Credit Card, the Menards Big Card, Lowes Credit Card, Lowes Project Card, and more.
However, in a time where the uncertainties linked to credit card debt have never been higher, is financing a home improvement project with a credit card a good idea? The answer is, it depends. Here is an overview of the pros and cons of hardware store credit cards.
Pros:
* 0% APR Financing Offers. Many of these cards offer a 0% APR introductory period for 6 to 12 months, essentially giving you an interest free loan. This is a great benefit, which can quickly add up if you are undertaking a large home improvement project. However, as we will discuss below, there is a catch.
* Special Offers and Rebates for Cardholders. Many hardware store credit cards offer special promotions to card holders, or e.g. a 2% rebate on purchases made with the card in the store.
Cons:
* 0% APR Financing Offers. That 0% APR may not mean zero interest. For most home improvement store credit card offers, the 0% interest applies only if the purchase is completely paid off before the 0% APR financing period expires. This includes “No Payments, No Interest” offers. If purchases aren’t paid of in full before the end of the promotional period, the standard APR will apply retroactively to all purchases made since you opened the account. Most hardware store credit cards come with a high purchase APR, so this could cost you a lot.
* One strike and your 0%APR is out. Not paying off your purchase before the expiration of the financing offer may not be the only thing that trigger the retroactive interest. For most hardware store cards, the standard APR will also be applied retroactively if you default on the credit card agreement, e.g. by paying late one month.
* High purchase APR. The average purchase APR on Home Depot credit cards, Lowes credit cards, and Menards credit cards are considerably higher than the average for regular credit cards. A purchase APR for a home improvement credit card issued by hardware stores starts at around 17.99% and can go as high as 26.99%.
* Highest default penalty rates in the industry. If you pay your credit card bill late, the penalty default rate applied to your account can be punitive. One consumer reports being penalized with a 45% default APR on her Menards credit card for making a late payment.
The bottom line: While private-label credit cards issued by major home improvement stores like Home Depot, Menards, and Lowes may seem like a convenient way of financing your renovation project, you could easily end up paying through your nose for the convenience.
Instead, consider looking into other types of home improvement credit cards with lower interest and better terms. If you time it right, the Discover More card offers one of the best credit card options for home improvement projects. The card comes with a low purchase APR and it gives a 5% cash back on home-related purchases three months a year, typically in the top home improvement season from April to June.
Source
For this reason, many people fall for the temptation to use a home improvement credit card to take out a short-term loan for purchasing the materials needed for their project. All the major hardware stores offer their own private label credit cards; for example, you can have your pick between a Home Depot Credit Card, the Menards Big Card, Lowes Credit Card, Lowes Project Card, and more.
However, in a time where the uncertainties linked to credit card debt have never been higher, is financing a home improvement project with a credit card a good idea? The answer is, it depends. Here is an overview of the pros and cons of hardware store credit cards.
Pros:
* 0% APR Financing Offers. Many of these cards offer a 0% APR introductory period for 6 to 12 months, essentially giving you an interest free loan. This is a great benefit, which can quickly add up if you are undertaking a large home improvement project. However, as we will discuss below, there is a catch.
* Special Offers and Rebates for Cardholders. Many hardware store credit cards offer special promotions to card holders, or e.g. a 2% rebate on purchases made with the card in the store.
Cons:
* 0% APR Financing Offers. That 0% APR may not mean zero interest. For most home improvement store credit card offers, the 0% interest applies only if the purchase is completely paid off before the 0% APR financing period expires. This includes “No Payments, No Interest” offers. If purchases aren’t paid of in full before the end of the promotional period, the standard APR will apply retroactively to all purchases made since you opened the account. Most hardware store credit cards come with a high purchase APR, so this could cost you a lot.
* One strike and your 0%APR is out. Not paying off your purchase before the expiration of the financing offer may not be the only thing that trigger the retroactive interest. For most hardware store cards, the standard APR will also be applied retroactively if you default on the credit card agreement, e.g. by paying late one month.
* High purchase APR. The average purchase APR on Home Depot credit cards, Lowes credit cards, and Menards credit cards are considerably higher than the average for regular credit cards. A purchase APR for a home improvement credit card issued by hardware stores starts at around 17.99% and can go as high as 26.99%.
* Highest default penalty rates in the industry. If you pay your credit card bill late, the penalty default rate applied to your account can be punitive. One consumer reports being penalized with a 45% default APR on her Menards credit card for making a late payment.
The bottom line: While private-label credit cards issued by major home improvement stores like Home Depot, Menards, and Lowes may seem like a convenient way of financing your renovation project, you could easily end up paying through your nose for the convenience.
Instead, consider looking into other types of home improvement credit cards with lower interest and better terms. If you time it right, the Discover More card offers one of the best credit card options for home improvement projects. The card comes with a low purchase APR and it gives a 5% cash back on home-related purchases three months a year, typically in the top home improvement season from April to June.
Source
Thursday, January 28, 2010
Mortgage rates may be low, but home-equity loans are souring at record pace
An American Bankers Assn. report today illustrated homeowners' struggles to repay debts they already have shouldered. Home equity loan delinquencies jumped from just over 4% in the second quarter to a record 4.30% of all accounts in the third quarter.
Delinquencies on home equity lines of credit also hit a new record, rising from 1.92% to 2.12% of all accounts, the bankers group said.
The troubles with housing debt contrasted with a general decline in consumer loan delinquency rates, as the economy begins to stabilize, recession-chastened borrowers pay down debts and banks write off dud loans as uncollectible. Delinquency rates improved in the third quarter on loans for cars, home improvements and even boats and recreational vehicles, the bankers group reported in its quarterly survey.
The survey by Freddie Mac, the government-controlled mortgage buyer, was conducted Monday through Wednesday and should be posted on Freddie's news site later today. It assumed that borrowers had good credit, a 20% down payment or equity in the home, and paid 0.7% of the loan amount in upfront lender charges, or points.
Last week, the average for a 30-year fixed loan was 5.14% and the week before 5.10%, Freddie Mac said. For the seven weeks before that, the average rate was less than 5% as government support for the mortgage market took effect, including heavy buying of mortgage bonds by the Federal Reserve. Last year at this time, the 30-year fixed rate mortgage averaged 5.10%.
Other mortgage rates, according to Freddie Mac:
--The 15-year fixed rate averaged 4.50% with an average 0.7 point, down from last week's 4.54% and 4.83% a year ago.
--The rate for a hybrid home loan, fixed for five years and then fluctuating with yields on Treasury securities, averaged 4.44% this week with 0.6 point, unchanged from last week and compared to 5.57% a year earlier.
--The 1-year Treasury-linked adjustable rate mortgage averaged 4.31% this week with an average 0.6 point, down from last week when it averaged 4.33%. At this time last year, the one-year ARM averaged 4.85%
Source
Delinquencies on home equity lines of credit also hit a new record, rising from 1.92% to 2.12% of all accounts, the bankers group said.
The troubles with housing debt contrasted with a general decline in consumer loan delinquency rates, as the economy begins to stabilize, recession-chastened borrowers pay down debts and banks write off dud loans as uncollectible. Delinquency rates improved in the third quarter on loans for cars, home improvements and even boats and recreational vehicles, the bankers group reported in its quarterly survey.
The survey by Freddie Mac, the government-controlled mortgage buyer, was conducted Monday through Wednesday and should be posted on Freddie's news site later today. It assumed that borrowers had good credit, a 20% down payment or equity in the home, and paid 0.7% of the loan amount in upfront lender charges, or points.
Last week, the average for a 30-year fixed loan was 5.14% and the week before 5.10%, Freddie Mac said. For the seven weeks before that, the average rate was less than 5% as government support for the mortgage market took effect, including heavy buying of mortgage bonds by the Federal Reserve. Last year at this time, the 30-year fixed rate mortgage averaged 5.10%.
Other mortgage rates, according to Freddie Mac:
--The 15-year fixed rate averaged 4.50% with an average 0.7 point, down from last week's 4.54% and 4.83% a year ago.
--The rate for a hybrid home loan, fixed for five years and then fluctuating with yields on Treasury securities, averaged 4.44% this week with 0.6 point, unchanged from last week and compared to 5.57% a year earlier.
--The 1-year Treasury-linked adjustable rate mortgage averaged 4.31% this week with an average 0.6 point, down from last week when it averaged 4.33%. At this time last year, the one-year ARM averaged 4.85%
Source
Friday, January 15, 2010
Delinquencies jump for home equity loans, lines of credit
Delinquencies on home equity loans and lines of credit jumped to record levels in the third quarter, a banking trade group said Thursday.
Home equity loan delinquencies rose to a record 4.3% of such accounts from 4.01% in the second quarter, the American Bankers Assn. reported.
Delinquencies on home equity lines of credit also hit a record, climbing to 2.12% from 1.92%.
The troubles with housing debt contrasted with an improvement seen with other consumer loans, the bankers group said.
Delinquency rates fell in the third quarter on loans for cars, home improvements and even boats and recreational vehicles, reflecting a stabilizing economy as well as efforts by recession-chastened borrowers to pay down debts and moves by banks to write off dud loans as uncollectable.
The bad news on home equity debt came as Freddie Mac, the government-controlled mortgage giant, reported that the average fixed rate on a 30-year home loan this week was 5.09%, the third straight week it had been just above 5%, Freddie Mac said Thursday.
The average, which applies to loans taken out by borrowers with good credit and at least a 20% down payment or 20% home equity, was 5.14% last week and 5.1% two weeks ago. Borrowers paid an average of 0.7% of the loan amount in upfront lender charges, or points.
For much of November and December, the average 30-year fixed rate was below 5%, reflecting government support for the mortgage market, including heavy buying of mortgage-backed bonds by the Federal Reserve. Last year at this time, the 30-year fixed rate averaged 5.1%.
The 15-year fixed rate this week averaged 4.5% with an average upfront fee of 0.7%, down from last week's 4.54% and 4.83% a year earlier.
Home equity loan delinquencies rose to a record 4.3% of such accounts from 4.01% in the second quarter, the American Bankers Assn. reported.
Delinquencies on home equity lines of credit also hit a record, climbing to 2.12% from 1.92%.
The troubles with housing debt contrasted with an improvement seen with other consumer loans, the bankers group said.
Delinquency rates fell in the third quarter on loans for cars, home improvements and even boats and recreational vehicles, reflecting a stabilizing economy as well as efforts by recession-chastened borrowers to pay down debts and moves by banks to write off dud loans as uncollectable.
The bad news on home equity debt came as Freddie Mac, the government-controlled mortgage giant, reported that the average fixed rate on a 30-year home loan this week was 5.09%, the third straight week it had been just above 5%, Freddie Mac said Thursday.
The average, which applies to loans taken out by borrowers with good credit and at least a 20% down payment or 20% home equity, was 5.14% last week and 5.1% two weeks ago. Borrowers paid an average of 0.7% of the loan amount in upfront lender charges, or points.
For much of November and December, the average 30-year fixed rate was below 5%, reflecting government support for the mortgage market, including heavy buying of mortgage-backed bonds by the Federal Reserve. Last year at this time, the 30-year fixed rate averaged 5.1%.
The 15-year fixed rate this week averaged 4.5% with an average upfront fee of 0.7%, down from last week's 4.54% and 4.83% a year earlier.
Monday, December 28, 2009
Home-owners face new interest rate hike
Home-owners with an average $300,000 mortgage can expect to pay an extra $46.21 on their monthly repayments assuming retail banks match the Reserve Bank of Australia's 25 basis point hike in the cash rate.
The market had expected the decision as the economy continued upon its road to recovery.
Only NAB had gone out on a limb and tipped a 50 basis point rate rise.
What will this mean to your home loan? Tell us using the feedback form below
"Economic conditions in Australia have been stronger than expected and measures of confidence have recovered,' RBA governor Glenn Stevens said.
"Some spending has probably been brought forward by the various policy initiatives. With those effects now diminishing, these areas of demand may soften somewhat.
"Some types of capital spending are likely to be held back for a while by financing constraints but it now appears that private investment will not be as weak as earlier expected.
"Medium-term prospects for investment appear, moreover, to be strengthening. Higher dwelling activity and public infrastructure spending are also starting to provide more support to spending.
"There have been some early signs of an improvement in labour market conditions. The rate of unemployment is now likely to peak at a considerably lower level than earlier expected.''
This rate increase marks the second consecutive rate rise by the central bank after its official rate had stayed a 49-year low of three per cent for part of this year.
A 25 basis point increase to the official rate means an additional $46 a month in repayments on a $300,000 home loan, according to comparison website Canstar Cannex.
Today's decision is expected to be part of a series of rate rises as the Reserve Bank goes about "normalising" its official rate.
Economists still expect the Reserve Bank to have raised rates to 4.25 per cent in six months' time.
The market had expected the decision as the economy continued upon its road to recovery.
Only NAB had gone out on a limb and tipped a 50 basis point rate rise.
What will this mean to your home loan? Tell us using the feedback form below
"Economic conditions in Australia have been stronger than expected and measures of confidence have recovered,' RBA governor Glenn Stevens said.
"Some spending has probably been brought forward by the various policy initiatives. With those effects now diminishing, these areas of demand may soften somewhat.
"Some types of capital spending are likely to be held back for a while by financing constraints but it now appears that private investment will not be as weak as earlier expected.
"Medium-term prospects for investment appear, moreover, to be strengthening. Higher dwelling activity and public infrastructure spending are also starting to provide more support to spending.
"There have been some early signs of an improvement in labour market conditions. The rate of unemployment is now likely to peak at a considerably lower level than earlier expected.''
This rate increase marks the second consecutive rate rise by the central bank after its official rate had stayed a 49-year low of three per cent for part of this year.
A 25 basis point increase to the official rate means an additional $46 a month in repayments on a $300,000 home loan, according to comparison website Canstar Cannex.
Today's decision is expected to be part of a series of rate rises as the Reserve Bank goes about "normalising" its official rate.
Economists still expect the Reserve Bank to have raised rates to 4.25 per cent in six months' time.
Tuesday, December 15, 2009
Business borrowers wait for rate rise sting
BANKS moved swiftly to raise variable home loan rates in line with the Reserve Bank's 0.25 per cent increase in the cash rate yesterday, but Westpac tried to upstage its rivals by promising not to boost the cost of small business credit.
While Commonwealth Bank's business borrowers will have a nervous wait to see whether they will cop another increase, NAB and ANZ said they were lifting rates on business loans by 0.25 per cent from the start of next week, The Herald Sun reports.
The RBA increased the official rate for the second month in a row and signalled it would move "gradually" to further tighten monetary policy.
"With the risk of serious economic contraction in Australia now having passed, the board's view is that it is prudent to lessen gradually the degree of monetary stimulus that was put in place when the outlook
appeared to be much weaker," RBA governor Glenn Stevens said.
"The adjustments at the October and November meetings will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead."
After the official rise the money market began "pricing out" the likelihood of a December rise, with the benchmark rate on 90-day bank bills tumbling 7 basis points to 3.88 per cent. The 90-day bill swap rate fell 8 basis points to close at a slight premium to the RBA's new cash rate of 3.5 per cent.
Joris Hillmann, the head of fixed income at Macquarie Funds Management, said the fall in bill rates reflected the lesser chance of a December rate move by the RBA.
"The market had previously priced in for month-on-month increases, but the reaction today suggests that RBA may keep rates on hold in December," he said.
Within minutes of yesterday's RBA announcement, ANZ boosted its variable rate home mortgage by 0.25 per cent to 6.31 per cent.
It was followed by CBA, NAB and Westpac, which each also increased their standard variable home loan rate by 25 basis points. CBA and NAB remain joint price leaders in the home loan market, both offering variable mortgages at 6.24 per cent.
But Westpac sprung a minor surprise, saying it would hold its business rates. Westpac and its subsidiary St George are making a pitch for new small business borrowers in Victoria and South Australia, where NAB and ANZ have traditionally held dominant market positions.
Westpac's pricing on its base rate for secured business lending will remain at 7.69 per cent, while NAB is set to reprice to 7.68 per cent.
Business lending price leader, CBA, is yet to decide whether it will move its secured lending rate up from 6.49 per cent.
"Our business rates are under review," said CBA spokesman Brian Fitzgerald.
The RBA is the only central bank in the world to have begun tightening monetary policy this year, and the latest official hike comes ahead of important board meetings later this week at the US Federal Reserve, the Bank of England and the European Central Bank.
No changes are expected to official rates in the US and Europe, but some economists have tipped the Bank of England may further ease monetary policy by launching a pound stg. 50 billion
re-purchase of government-backed paper.
Money market traders are waiting keenly for the latest US employment data due on Friday after a warning from President Barak Obama on Monday that the US workforce may still be contracting.
The RBA's Mr Stevens noted yesterday that economic growth in China was having a "significant impact on other economies in the region and on commodity markets".
He said economic conditions in Australia had been stronger than expected and measures of confidence had recovered.
"There have been some early signs of an improvement in labour market conditions," he said.
"The rate of unemployment is now likely to peak at a considerably lower level than earlier expected."
The RBA's decision not to tighten by more than 0.25 per cent contributed to a fall in the Australian dollar, which peaked at US91.22 in the minutes before the rate announcement. It was hovering near US89.70 last night.
Source
While Commonwealth Bank's business borrowers will have a nervous wait to see whether they will cop another increase, NAB and ANZ said they were lifting rates on business loans by 0.25 per cent from the start of next week, The Herald Sun reports.
The RBA increased the official rate for the second month in a row and signalled it would move "gradually" to further tighten monetary policy.
"With the risk of serious economic contraction in Australia now having passed, the board's view is that it is prudent to lessen gradually the degree of monetary stimulus that was put in place when the outlook
appeared to be much weaker," RBA governor Glenn Stevens said.
"The adjustments at the October and November meetings will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead."
After the official rise the money market began "pricing out" the likelihood of a December rise, with the benchmark rate on 90-day bank bills tumbling 7 basis points to 3.88 per cent. The 90-day bill swap rate fell 8 basis points to close at a slight premium to the RBA's new cash rate of 3.5 per cent.
Joris Hillmann, the head of fixed income at Macquarie Funds Management, said the fall in bill rates reflected the lesser chance of a December rate move by the RBA.
"The market had previously priced in for month-on-month increases, but the reaction today suggests that RBA may keep rates on hold in December," he said.
Within minutes of yesterday's RBA announcement, ANZ boosted its variable rate home mortgage by 0.25 per cent to 6.31 per cent.
It was followed by CBA, NAB and Westpac, which each also increased their standard variable home loan rate by 25 basis points. CBA and NAB remain joint price leaders in the home loan market, both offering variable mortgages at 6.24 per cent.
But Westpac sprung a minor surprise, saying it would hold its business rates. Westpac and its subsidiary St George are making a pitch for new small business borrowers in Victoria and South Australia, where NAB and ANZ have traditionally held dominant market positions.
Westpac's pricing on its base rate for secured business lending will remain at 7.69 per cent, while NAB is set to reprice to 7.68 per cent.
Business lending price leader, CBA, is yet to decide whether it will move its secured lending rate up from 6.49 per cent.
"Our business rates are under review," said CBA spokesman Brian Fitzgerald.
The RBA is the only central bank in the world to have begun tightening monetary policy this year, and the latest official hike comes ahead of important board meetings later this week at the US Federal Reserve, the Bank of England and the European Central Bank.
No changes are expected to official rates in the US and Europe, but some economists have tipped the Bank of England may further ease monetary policy by launching a pound stg. 50 billion
re-purchase of government-backed paper.
Money market traders are waiting keenly for the latest US employment data due on Friday after a warning from President Barak Obama on Monday that the US workforce may still be contracting.
The RBA's Mr Stevens noted yesterday that economic growth in China was having a "significant impact on other economies in the region and on commodity markets".
He said economic conditions in Australia had been stronger than expected and measures of confidence had recovered.
"There have been some early signs of an improvement in labour market conditions," he said.
"The rate of unemployment is now likely to peak at a considerably lower level than earlier expected."
The RBA's decision not to tighten by more than 0.25 per cent contributed to a fall in the Australian dollar, which peaked at US91.22 in the minutes before the rate announcement. It was hovering near US89.70 last night.
Source
Saturday, November 28, 2009
Plan a Vacation or Research a Mortgage?
Americans spend more time looking into home-improvement projects than they do on refinancing. With mortgage rates at less than 5% this year, the lowest in any 10-month stretch since 1971, proper research can save tens of thousands of dollars during the life of a home loan."People seem not to want to spend a lot of time on mortgage shopping, but it's incredibly important," says Stan Humphries, chief economist for Zillow.com, a real estate Web site that provides price estimates on 70 million U.S. homes. "It's very common that people will just reach out to their current lender to see what they can do about rates."
Humphries says those who plan to refinance ought to check different lenders' rates -- as well as their reputation.
A recent survey by Harris Interactive for Zillow.com of 2,897 consumers who obtained or refinanced a home loan in the past five years found they typically spent only five hours on research. An equal amount of time was spent planning a vacation and, on average, more time was taken in researching a car purchase (eight hours) and home improvements (10 hours). When calculated as time spent per dollar invested, Harris Interactive determined that Americans spend almost 80 times more time researching their vacation than a home loan.
According to Zillow's Mortgage Marketplace, refinance-loan requests through its site are up 39% since September, making up more than 51% of all consumer-loan requests. Its sampling of offered rates is even more competitive than Freddie Mac's(FRE Quote) statistics. On Nov. 2, its average 30-year mortgage rate was 4.78%, 77 basis points lower than in June, when it was 5.55%, the highest this year.
Refinancing has accounted for almost seven of 10 mortgage applications this year, according to Frank Nothaft, chief economist at Freddie Mac. Thirty-year fixed-mortgage rates were 6.46% a year ago, according to Freddie Mac.
Even a slight decrease in rates can mean big savings. Assuming a fixed rate of 4.9% on a $200,000 loan (with a home price of $250,000), the monthly principal and interest payment would be $1,064, compared with $1,141 for the same loan in June. The savings would total $27,788 over the life of the loan.
Zillow.com's Humphries doesn't expect the record-setting lows to last much longer. As the Federal Reserve ramps down its purchase of mortgage-backed securities, he expects rates to begin to rise in the first quarter.
"You see plenty of people speculating on both sides, but I would definitely say that the probability of the upside in outweighs the probability of the downside," he says.
Source
Humphries says those who plan to refinance ought to check different lenders' rates -- as well as their reputation.
A recent survey by Harris Interactive for Zillow.com of 2,897 consumers who obtained or refinanced a home loan in the past five years found they typically spent only five hours on research. An equal amount of time was spent planning a vacation and, on average, more time was taken in researching a car purchase (eight hours) and home improvements (10 hours). When calculated as time spent per dollar invested, Harris Interactive determined that Americans spend almost 80 times more time researching their vacation than a home loan.
According to Zillow's Mortgage Marketplace, refinance-loan requests through its site are up 39% since September, making up more than 51% of all consumer-loan requests. Its sampling of offered rates is even more competitive than Freddie Mac's(FRE Quote) statistics. On Nov. 2, its average 30-year mortgage rate was 4.78%, 77 basis points lower than in June, when it was 5.55%, the highest this year.
Refinancing has accounted for almost seven of 10 mortgage applications this year, according to Frank Nothaft, chief economist at Freddie Mac. Thirty-year fixed-mortgage rates were 6.46% a year ago, according to Freddie Mac.
Even a slight decrease in rates can mean big savings. Assuming a fixed rate of 4.9% on a $200,000 loan (with a home price of $250,000), the monthly principal and interest payment would be $1,064, compared with $1,141 for the same loan in June. The savings would total $27,788 over the life of the loan.
Zillow.com's Humphries doesn't expect the record-setting lows to last much longer. As the Federal Reserve ramps down its purchase of mortgage-backed securities, he expects rates to begin to rise in the first quarter.
"You see plenty of people speculating on both sides, but I would definitely say that the probability of the upside in outweighs the probability of the downside," he says.
Source
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