Mortgage Rates Down, But Are Americans Able To Tap Them?

Freddie Mac released the results of its weekly mortgage interest rate survey today and it turns out long-term rates are down again. The average rate on a 30-year fixed rate mortgage slipped down to 4.80 percent, excluding points, during the week ended April 23, from 4.82 percent.

Rates on 15-year FRM loans were unchanged, but rates on one-year adjustable rate mortgages are now higher than 30-year FRM loans at 4.82 percent, a historical first in the Freddie Mac survey.

Here’s what Freddie Mac’s vice president and chief economist, Frank Nothaft had to say about the mortgage situation.

“Interest rates for 1-year ARMs exceeded those for 30-year fixed-rate mortgages over the last two weeks; this is the first time this has happened since Freddie Mac began collecting data for ARMs in January 1984. The housing market is showing further signs of possible improvement. House prices rose for the second consecutive month in February, the first back-to-back increase since April 2007, according to the Federal Housing Finance Agency.”

Yet for many people, low interest rates may not be enough or even the right tool for helping the housing market stabilize.

According to a comment in response to a posting by Peter Boockvar on  The Big Picture blog  the real issue at hand is the new, stricter lending standards. There are fewer and fewer loan programs available, especially for those with less than perfect credit. And while this means low interest rates are of little use to many potential homebuyers when they don’t end up qualifying, as commenter CPJ13 says, maybe its for the best.

…Some of the criticism for why housing hasn’t rebounded is misguided (”rates need to be lower and more affordable”, “houses need to come down in price”, etc.).

The real reason that we’re correcting so sharply – and will continue to for a long time – is that ‘historically normal’ guidelines have been reapplied to the home-buying process. Everyone got so drunk on cheap, free and loose credit that once the spigot is shut off to all but those who ’should’ be buying houses, it’s a painful process and we’re not nearly through it.

People now have to think about SAVING for a down payment; they have to consider their overall credit (late on credit cards? collections? Etc.)…

Simply stat[ed]… it’s going to take a loooong time for housing to recover if we stick to currently guidelines and standards. It’s a good thing – but yes, it will be painful…


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