Mortgage Rates Need to cool down

MORTGAGE RATES NEED TO COOL DOWN RIGHT NOW AND HERE’S WHY

The debate on whether mortgage rates should go lower or higher has raged on for a lengthy period, perhaps since mortgage rates existed. On one side, there have been continued calls for mortgage rates to get even lower, yet there is every reason to support that motion given the current situation of affairs around the world. Several factors come into the picture in terms of the determinants of mortgage rates. But regulators should not place these determining factors above the need for flexibility for consumers - especially those consumers whose finances have been affected by the coronavirus pandemic.

In the early days of May last year (2020), a piece of good news broke out that mortgage rates had been reduced by a wide margin and also came to an all-time low. It was enough to be jubilant about because 2020 was notably a tough year - one of the toughest ever - and it felt good to note that the wellbeing of consumers was duly considered toward the arrival of that decision.

What that development meant was that a new 30-year fixed mortgage now has its interest

rate set at 3.23%, which is so low a rate, an all-time low, to be precise. It became the lowest since Freddie Mac, a mortgage agency, began collecting such data half a century ago.

Despite the plummet in the rates, experts in the industry still believed that there could have been more reductions made to it than what was initiated. The global financial crisis also ensured that there would be a change in the US ten-year Treasury yields, which sat at 0.6%.

The plain reason for these changes was that there was no fluid communication between demand and supply. The chain then turned to a weak link and was no longer as effective as was earlier imagined and predicted.

This fluctuation also led to an increase in the number of refinancing applications because of how rapidly the interest rates were falling. Even the refinance applicants began to find it very challenging to meet the application criteria due to the social and economic impact caused by the lockdown. The lockdown made it difficult for some applicants to meet deadlines for the closure of deals, and other applicants struggled to meet the financial demands of their applications.

WHY DO MORTGAGE RATES NEED TO GET LOWER?

Quite plain: lower mortgage rates are in themselves more consumer-friendly. And at this time, that is essential.

For consumers, lower mortgage rates mean that they would be able to pay less for mortgages. The amount which they will have to pay per month is significantly reduced. Also, it means that the cost of interest would lessen over a period. And besides, when mortgage rates plummet, consumers can maximize their housing budget and might then have more to afford the house.

One reason why mortgage rates go high is that interest rates will keep dropping. When this continues to happen, it will surely be slightly difficult for the mortgage rates to not be on the increase. The factors responsible for inflicting inflation on mortgage rates need to be tamed and controlled. There should be a unanimous policy that allows for mortgage rates to maintain a healthy balance so that consumers don’t have to go through a lot trying to get their mortgages covered.

Not many people would comfortably afford high mortgage rates; that is understandable because there has been an economic downturn in the last months which has knocked not only last-end consumers but also companies. Until balance is restored, there will continue to be a significant problem for struggling consumers to keep up with these mortgage rates. Once the rates are reduced, there would be a surge in the number of people who can afford them, making life less grueling and more comfortable.

FINAL WORDS

Although it will be a hard call for mortgage agencies to insert much lower rates than they have already done, it would be a significant and timely boost for consumers. And making consumers happy might not yield short-term benefits, but it would definitely do so in the long run.

References

http://ft.com/content/a183170b-39204b74-b4be-641d35c7b256 https://www.housingwire.com/articles/ hey-home-shoppers-heres-whathistorically-low-mortgage-rates-meanfor-you/