Refinance rates vary significantly from lenders as banks see mortgage applications surge
Consumers shopping for the best mortgage refinance rates could be in for a suprise if they limit their search to their existing servicing company. The surge of mortgage applications over the past month due to historically low interest rates has had an unusual impact on the market. Numerous banks are raising their margins (profit) on the mortgages that they offer as they have a huge spike in business and in many cases have limited capacity to underwrite the new loans.
The mortgage industry has always been one that has directly grown or shrunk due to interest rates, consumer demand and loan volume. The surge in applications due to the low rates has been a radical change for the market that saw interest rates well above six percent during the summer of 2008 and consumers sharply pulling back on home refinances as home values and equity eroded. The new surge of applications also will intensify the underwriting guidelines as lenders are wary of making any exceptions to candidates who lack the credit, income or collateral to meet all of the loan guidelines. Banks are in a position where they can be ultra selective to the loans that they are going to be adding to their servicing portfolios. The major lesson to learn is that if you are shopping for a refinance mortgage loan then it is critically important to obtain quotes from more than one mortgage lender to ensure you receive the best loan terms.
Employment numbers continue to illustrate economic challenges
The economy took another blow on Friday as the December jobs report was released showing a significant increase with unemployed workers. The stock market took the news in stride and has only posted moderate losses as fears of a much larger loss of jobs was anticipated. There is speculation that the large loss in jobs will add motivation for the government to aggressively ramp up their proposed stimulus program a moved aimed at providing relief for both individuals and companies to get back on track.
Economists universally agree that fixing the economy will centered on two major components, restoring job growth and fixing the housing market. There is speculation that the market could continue to see job losses mount well into 2009. The challenges with the economy are likely to take many months to begin correcting. The chairman of the Boston Fed reserve indicated in a speech on Thursday that there is growing beliew that the recession will now be larger and longer than originally anticipated, but the moves made by the FOMC late in 2008, increased funds for banks to begin lending and the hope of a large economic stimulus program in 2009 should begin to take positive effect on changing the economies course.
New year brings on hope for economic improvement
Consumers around the globe should feel better now that one of the worst economic years is in the books. The economy is facing many challenges heading into 2009, but knowledge that the worst of the market should be behind us should help everyone to feel better about the chances of a rebound at some point this year. The U.S. economy is likely to benefit from a broad economic stimulus package that is likely to include a tax reduction for both individuals and corporations.
The real estate industry is likely to lobby congress for additional measures to help restore confidence in purchasing homes. There are a number of ideas that are being discussed including additional tax credits, lower fixed interest rates and new lending programs. Home owners have recently benefited from the dramatic drop with mortgage interest rates and have had the opportunity to lock in low fixed rate loans through refinancing out of their existing mortgage loan.
There is growing sentiment that the banks that have received funding through the TARP program will need to increase their lending both on the consumer as well as business side of their business. This additional capital could help to boost the economy and restore job growth, a critical component in fixing the economy this year.