Wednesday, 18 March 2015

Why mortgage interest rates Low-Jeff Adams

Why mortgage interest rates Low the Mortgage Bankers Association (MBA) announced in late February that housing is poised for stronger increase in 2015. Yet mortgage interest rates remain low.

That depends on your lenience for risk. Despite a positive outlook for the economy, researchers said that worries over worldwide economic weakness continue to attract investors to US Treasuries.

As investments, mortgages vie with treasury bonds. According to researchers, a 30-year rate mortgage has a lifespan of about 7 years, making the 10-year Treasury bond the closest similar investment. That is why mortgage rates tend to fall when the treasury rate falls, and rise when the rate rises.

Right now, the US economy is ongoing on a path of steady increase. In 2014 payrolls grew at the maximum rate since 1999. Low oil costs have lowered the import costs of well and increased cash flow for consumers, which have helped drive economic growth for the past few quarters. All this good news should result in higher interest rates, but the MBA saying global economic weakness and supporting unrest are putting downward pressure on interest rates.

For the reason that oil prices are predicted to remain low for a long time, and the U.S. dollar is getting stronger, the MBA says consumer price inflation will be held to 1.4 % for 2015. That's a good thing because inflation is the enemy of mortgage interest rates. If inflation picks up, the government will raise rates on suddenly borrowing rates to banks. The result will be higher lending rates to consumers.

In its most recent weekly survey, Freddie Mac showed average fixed mortgage rates moved higher amid solid housing data on new home sales and home price approval. That said, fixed rates are still near lows not seen since May 2013.

The benchmark 30-year fixed-rate mortgage averaged 3.80 % with an average 0.6 point for the week. Match up to that to one year ago when the average 30-year fixed rate mortgage was 4.37 %.