bank rates

Mortgage Rates Near Yearly Highs

The credit crunch won’t be over until home values stop tanking, and that won’t happen until mortgage rates are low enough to attract new buyers.

Considering that mortgage rates are at their yearly highs since the early 2000s (according to Bankrate data), and that the Fed has nearly exhausted it’s toolbox of financial instruments to stabilize the credit markets, I’d say we have a long, long, ways to go until this whole mess is over.

I’ve been in contact with a local Realtor who observes that buyers with good credit are facing unreasonably high rates while buyers with mediocre credit can’t even get a loan at all—renting is by far a more favorable option in this environment.

Fannie / Freddie recently upped their fees that they charge lenders because it is getting more and more expensive to insure mortgages as defaults rise. Lenders pass these fees onto the home-buyer in the form in increased rates, points, and closing fees.

A lot of developments will revolve around the Treasury’s ‘solution’ to bailout Fannie Mae / Freddie Mac. These companies buy up or guarantee over half of the country’s mortgages so that lenders will have enough capital to re-loan to new home-buyers. There is absolutely no way that either of these companies can stop functioning—failure would be financial armageddon.

Stabilizing Fannie / Freddie will be the first step toward bringing rates down to a reasonable level. The problem is, in every possible scenario, whether it is nationalization or a bail-out, it will be the tax payers who will be footing the bill.

Until then, stay on the sidelines because home values have a long ways to go down.

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  1. Index option Trader said:
    on August 26th at 06:45 am

    Mortgage rates are still very low compared to historical rates.