Mortgage Loan Rates Should Remain Low for 2010
Thursday, May 20th, 2010Clearly the Fed has played a significant role in helping the mortgage industry rebuild its foundation. It’s like the risky Payment Option ARM loans, subprime mortgages and no income loan products have vanished in thin air. The Obama administration and the Federal Reserve have certainly talked about mortgage reform and indirectly this has helped bad credit mortgage lenders and banks implement less volatile home loan products that may have previously unintentionally promoted predatory lending. At least for now it seems that the mortgage lenders who are still in business have a broader perspective than in previous years and maybe they are putting the borrower first.
According to Bloomberg News, the Federal Reserve understands that keeping key interest rates unchanged is critical for maintain affordable mortgage interest rates that will help the housing sector recover. 30-year fixed rate mortgage loans are available below 5% from most lenders nationally.
Cleveland Federal Reserve President Sandra Pianalto“For the next couple of years, I expect employment levels to remain well below what I would consider full employment,” and inflation will “only gradually drift up from its currently low level” to a mark that will nevertheless remain “subdued,” Federal Reserve Bank of Cleveland President Sandra Pianalto said. “This outlook warrants exceptionally low levels of the federal funds rate for an extended period of time,” she said. But she also noted there is “more uncertainty than usual around my outlook” and policymakers will need to apply more discretion than is typically the case. “It will be critical to monitor incoming information and respond as necessary to promote economic recovery and price stability,” Pianalto said. Pianalto, who made the comments in a speech before the Economic Club of Pittsburgh, is a voting member of the interest rate-setting Federal Open Market Committee.
Most mortgage executives remain confident the U.S. won’t fall back into recession — a survey released last week by the Federal Reserve Bank of Philadelphia showed forecasters lowering already reduced odds of a double-dip recession. At the same time forecasters have been pushing back odds of a Fed rate tightening. Pianalto said she is not looking for a particularly vigorous recovery. “Our journey out of this deep recession will be a slow one” because of the negative impact of long-term joblessness, coupled with “a heightened sense of caution on the part of consumers and businesspeople,” she said.
