The State of Mortgages

Mortgage rates remain in a narrow and favorable range. In recent days, rates for 30-year fixed-rate mortgages as gauged by Freddie Mac averaged below 5% percent again. This means for a primary house mortgage with at least 20 percent down and very good credit, rates are quite attractive. Interest rates on government insured FHA and VA mortgages were slightly higher.

Fifteen-year mortgage rates typically carry rates that are around a half to three-eighths lower then typical 30-year rates.

Interest rates on adjustable rate mortgages that have fixed terms of three, five and seven years were approaching a rate of 4 percent.

The turmoil in the European markets produced instability in stock markets worldwide. When stock markets falter, investors put money into safer investments, which include the bond market. When bonds do well, so do interest rates. The yield on the 10-Year Treasuries was testing the 4 percent level before the turmoil in the stock markets. The yield for 10-Year Treasuries is now in the 3.5 percent range. The “flight to safety” should continue for at least the short term.

Inflation or the fear of inflation is the major driving force for a rise in interest rates. There is little fear of inflation, nationally or globally. Some economists state that the long-term trend in inflation globally is titled in the direction of less inflation or even deflation.

In the short term, there is no doubt that inflation is well under control and there is no fear of inflation rearing its head.

If the European Union slides towards recession, then there will be no chance of interest rate rises by the Federal Reserve in the foreseeable future.

Employment is starting the long road back to recovery. Jobs are starting to increase. However, more people are coming back into the job market, looking for jobs. That is why the unemployment rate rose to 9.9 percent, even though there was healthy job growth. There is a lot of work yet to be done.

Underwriting standards remain strict. This means a loan has to be well documented with all the income and asset statements. If there is a gray area on a loan, the underwriter will cast doubt instead of giving the benefit of the situation. Mortgage loans are available, but the client has to be well qualified.

If you are in the market for a mortgage, this can be a good time for you. Rates are low and as long as you can meet the underwriting criteria, you should end up with an excellent mortgage.

Bill Starrels lives in Georgetown, specializing in residential mortgages. He can be reached at 703-625-7355 or bill.starrels@gmail.com.

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Tue, 21 Oct 2014 01:18:10 -0400

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