October provides great window to refinance and purchase

Home owners across the country have been provided with a great opportunity here in October. The national average for a fixed rate home loan has dropped to its lowest level since early January, providing another chance to lock in a historically low home loan rate. Interest rates on average, according to Freddie Mac, one of the nations largest agency lenders have dropped to 5.125%, with .6pts according to recently released figures. These mark the lowest interest rates have been at in quite some time and is great news for homeowners who have yet to take advantage of a refinance mortgage this year.

The month of October is also going to be a pivotal month for home buyers who have less than sixty days to lock to close on a home purchase and take advantage of up to $8,000 in tax credits from the government. The low rates and expiring tax credits are certain to entice buyers who have been on the fence hoping for better deals to move forward with their purchases in the upcoming weeks. The drop with interest rates since June, allows a homeowner to save well over $100 per month on their mortgage if they are in a home with a loan balance over $200,000. This savings is certainly welcome news to potential buyers and current home owners at a time when the economy has yet to pull out of the downward recession.

Mortgage rates have been trending down in the month, primarily as a result of investors aggressively moving out of the stock market. The stock market has shed almost five hundred points, until a recent rally in which the market has recovered some of its losses. The mortgage industry, to date has proven to be quite resilient against upward movement in the stock market, which does not go historic tendencies. In years past when the stock market rises, fixed mortgage rates have always risen in lockstep. This year has proven to be the exception to the rule, as fixed rate loans are greatly benefitting from a decision by the federal reserve to continue to support the mortgage back securities market through purchasing these assets. The Fed’s decision to initially begin purchasing mortgage backed securities in December and again in March helped push fixed rate loans to their historic lows. During the most recent FOMC meeting, the Fed appears committed to continue with this policy of helping to invest in mortgage backed securities. The Fed would like to begin pulling out of this market, but realizes they will provide a necessary bridge between the private markets and the state of the current marketplace to help ensure that the real estate industry has its full support.

The prospect of long term rates moving into the six percent range or higher for the balance of 2009 appears quite low. There remains little to no inflationary pressure in the market today (with the exception of oil). The commitment by the FOMC to continue supporting the secondary market will certainly help keep rates attractive during the transition to marketplace that is more investor driven.