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Prime Time for Homebuyers

Starr Mortgage likes to keep its customers well informed. Part of the way that we do this is by taking note of the current economic temperature and trends that directly affect the products that we are able to offer. We create newsletters that help our clients understand what is going on in the market and what might effect interest rates going forward.  This month we are highlighting compelling market conditions effecting interest rates as well as an overall real estate outlook for the year.

April Brings Good Mortgage Rate News

Who wouldn’t want 10% more home for the money? It’s prime-time to cash in on the opportunity with mortgage rates in the mid to high 3’s entering April. With just under 6 months of sub 4% rates-it couldn’t be a better time to buy a home. Leonard Kiefer, deputy chief economist at Freddie Mac, “this is great news for housing markets, especially headed into the spring home buying season. Lower rates help to offset some of the recent increases in house prices and keep homebuyer affordability high.” Also, homeowners are rushing to the head of the line to refinance their homes taking advantage of that pretty 30% plus savings per year available to them now. Economists are encouraging homeowners to revisit the current mortgage rates for potential savings, even if they have recently refinanced their home.

A Positive Look for the Year

Thanks to a few particular factors, the U.S. economy is growing at a steady pace and favors stable rates in 2015 predictions. Increased investment in secure bonds is one of the contributors. Mortgage rates are responsive to the price of mortgage-backed securities (MBS) because they are valued in U.S. dollars. When the value of the dollar rises, so does the value of MBS. Basically, when investment in security bonds increase, it results in lower mortgage rates.

Steady global growth is another one of the factors affecting the positive outlook for 2015. “We also do not foresee a major turnaround in the global growth picture and therefore recent trends in foreign buying activity should continue. That means continued downward pressure on long-term interest rates here in the U.S. Even if the Federal Reserve begins raising short-term rates later this year, don’t expect to see long-term rates — including mortgage rates — increase much.” said Leonard Kiefer in a recent report. Finally, the current rate of inflation/disinflation in our country plays a role in the mortgage rates we are seeing now.

Mortgage Market Expert Dan Green explains, “To avoid disinflation, Fed has taken steps since 2009 to stimulate the economy but, thus far, those efforts have yet to manifest throughout the economy fully. And now, with oil prices low, some fear that Cost of Living indices will begin to show price drops. Recent data puts the annual inflation rate near one percent annually. The Fed acknowledges low inflation rates as a near-term issue, but believes that inflation rates will return to more “stable” rates in the coming months. Expect a push-pull on inflation/disinflation forces throughout April and May and into the summer months. Rising inflation rates will send mortgage rates up. Falling inflation rates will lead mortgage rates down.”

Although, this is good news and rates are at historic lows, the availability of homes in this market still creates a challenge for the home buyer. Finding a home to accompany that great rate may take some tenacity since the economy and home sales have been quite modest as of late. Don’t let this deter you, rather let this and the fact that low rates won’t stick around forever just be motivating factors to strike while the iron is hot.

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