Monday, November 17, 2008

LOWER MORTGAGE RATES FOR THE HOLIDAYS MAY BOOST YEAR-END HOME BUYING

Home loan rates appear to be heading lower for the balance of 2008, giving year-end home buyers a holiday incentive to shop for bargains being offered by Chicago-area home builders, developers and Realtors.

Freddie Mac’s Primary Mortgage Market Survey reported that average interest charges on benchmark 30-year fixed-rate mortgage slipped to 6.14 percent in mid-November from 6.20 percent a week earlier. Last year at this time, the 30-year fixed mortgages averaged 6.24 percent.

Long-term mortgage rates fell for the second week in a row because of the continued slow down of the economy, according to Frank Nothaft, Freddie Mac vice president and chief economist.

“The actions of the Federal Reserve Board in recent weeks to assist commercial paper markets appear to be thawing part of the credit freeze that has gripped capital markets in the U.S., giving banks some breathing room,” Nothaft said. Fifteen-year fixed mortgages declined to an average of 5.81 percent from 5.88 percent a week earlier. A year ago, the 15-year loans averaged 5.88 percent.

However, 1-year Treasury-indexed adjustable-rate mortgages inched upward to an average of 5.33 percent from 5.25 percent a week earlier. At this time last year, the 1-year ARM averaged 5.50 percent.

More good news came in mid-November, when the government said it would help hundreds of thousands of homeowners who have fallen behind on mortgage payments at least 90 days and are at risk of foreclosure.

Freddie Mac, Fannie Mae and the Treasury Department along with a consortium of participating mortgage lenders, investors and loan servicers announced a program that would modify the terms of troubled loans to reduce monthly payments and lower interest rates.

Long-term good news for mortgage borrowers also came from Uncle Sam in mid-November as the government begins to clear up the subprime mortgage debacle.

Prospective home buyers now will get better guidance and save money under new rules from the Department of Housing and Urban Development designed to make mortgage forms easier to understand.

Consumer advocates have complained that mortgage documents are filled with legal jargon and fine print that average borrowers do not understand and likely do not read.

Uncle Sam overhauled a 1974 law requiring lenders to give a “good faith estimate” of mortgage costs, including lenders’ payments to mortgage brokers. The government says the new mortgage forms, which will be required starting on January 1, 2010, should save consumers about $700 in closing costs.

Uncle Sam also is helping first-time buyers struggling to save the down payment and closing costs needed to buy a home or condominium. Between now and June 30, 2009 first-time home buyers are eligible for a new $7,500 tax credit which acts like an interest-free loan.

The Federal Housing Administration also recently increased loan limits on FHA-insured mortgages, which now require a down payment of only 3.5 percent of the purchase price.

According to Illinois Association of Realtors, buyer’s-market conditions now exist with low interest rates, an ample supply of existing homes and condominiums, and negotiating room on price.