Mortgage Interest Rate Forecast for 2009 & 2010
FHA & Conventional with Fixed Rates, ARM, Interest Only
The US economy looks to be ending 2009 with the worst economic slide since the Great Depression, but borrowers could get a fixed loan with a 4.625% mortgage rate, so things couldn’t be that bad. The subprime mortgage and foreclosure crisis caused an already weak housing market to drop to dangerous levels. How does this affect 2009 mortgage rates? Great! The Federal Reserve dropped mortgage rates to a record low! The Fed has once again used interest rates as a tool to stimulate home buying and refinancing. According to the recently-released MBA economic forecasts for the next three years, fixed mortgage rates are expected to decline to 4.5 percent by the end of 2009 and to remain around that level. The California Association of Mortgage Brokers (CAMB) annual mortgage forecast indicates the interest rates will remain favorable in 2009 with home refinancing rates likely to remain within a percent of the current low levels. Read more at get the current interest rates at the Mortgage Loan BLOG.
Some experts indicate that Federal Reserve rate cut cycle could end 2010, but not until the summer or fall because by that time the dollar may be making some sort of bottom in anticipation of Fed cuts to boost economic growth. Fed Chairman Bernanke spoke before Congress this week in the Fed's semi-annual report on monetary policy. While of course cautious, he continued to make soothing remarks with regard to the direction of inflation, which has been on a modest easing track for a number of months, led by settling energy prices.
With $1.5 Trillion dollars of mortgage loans adjusted in 2007, to significantly higher interest rates, and just as predicted the foreclosures sky-rocketed. Unfortunately, many borrowers face financial difficulties and loan defaults soared . In 2008 and 2009, property values tanked in due to the record number of foreclosure sales. But, with interest rates dipping once again in 2009 , this may be a good year to refinance into a 15-year or 30-year fixed-rate loan or one of the hybrid ARMs, which have longer fixed periods of three, five, seven or 10 years. With any adjustable mortgage, you run the risk of interest rates rising and then your payment rises. The interest rates on ARMs are based on a lender-specified fixed-rate margin plus a publicly-available prime rate index like the LIBOR Index, COFI Index, COSI Index, MTA Index, etc. Many of the indices are anticipated to remain relatively stable for a while then creep up slightly as borrower credit quality diminishes.
"Interest rates will remain extremely favorable to borrowers in 2007," said Jack Williams, president of the California Association of Mortgage Brokers. "Fixed rate loans are making a comeback for those who are refinancing while alternative loan products are likely to remain popular because of high housing costs. It is important for consumers to make sure they understand how the various loan programs work to ensure that the loan program they select meets their financial objective or fits their own unique needs." Alternate loan products include the controversial interest only and negative amortization loans that deviate from typical mortgages with principal and interest payments in favor of short-term affordability.
"The first six months of 2010 will probably be the ideal time for consumers to purchase a home," said Williams. "During that period, there will be fewer buyers, more housing inventory, low interest rates, and more motivated sellers." Just keep in mind that the 2010 Fannie Mae, Freddie Mac and FHA loan limits will remain unchanged from their 2009 levels of $625,500 for a single-family home in a high cost region.