Fed Maintains Low Rates and Consumers Benefit from Low Home Mortgage Rates
04/10/09
The inauguration of Barack Obama, the 44th President of the United States, ushered in a new era of hope. People let go of their despair over the current economic woes and embraced the celebration in various ways. As the President enters his second week in office, the economy is still the most pressing concern. Unemployment rates are on the rise and families continue to struggle to make ends meet. The new team in the White House plans to give a boost to small business owners and regular middle class Americans who are struggling, as well as restructure the stimulus plan introduced by the previous administration. It plans to offer low home mortgage rates in the hopes that it will help boost the ailing housing market. The drop in home mortgage rates have been a welcome change for those hoping to refinance or purchase a new home. Although lending standards are now more restrictive, many qualified consumers are jumping at the chance to lock in a low rate for a home mortgage.
As of the second week of January, the Federal Reserve kept its rates hovering around 0 percent. The Fed rate is the rate that banks lend to each other, so translates to lower rates for consumers. In spite of home mortgage rate cuts, banks have adopted much more restrictive lending practices. As a result of the credit crisis, banks are now more risk averse. Qualified borrowers need to have stellar credit reports and scores and put more money down. That means that fewer consumers are eligible for the lowest home mortgage rates than were just a short year ago. A consumer looking to refinance a home mortgage will be under the same scrutiny as one applying for a home mortgage for the first time. Homeowners in some real estate markets have experienced such a decrease in home prices that many owe more on their home mortgage than the home is worth. With larger amounts of equity needed to be eligible, many lenders are having to turn down home mortgage refinancing applicants for that reason alone.
Many predict that inflation will make interest rates slowly creep back up. Consumers who have good credit scores and solid credit reports are not taking any chances and are seizing the opportunity to secure low home mortgage rates, particularly for refinancing. The savings accrued by lower monthly home mortgage payments can be enough to help many consumers weather the economic storm.
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