| Fed's rate cuts ignite a rush to refinance
A positive note in the chorus of bad economic news sounds loudly, like a call to arms. Or, as happened after the Federal Reserve dropped short-term interest rates three-quarters of a percentage point Tuesday, a race to refinance. The refinancing frenzy began right after the Fed's announcement, local brokers and bankers reported. The 10-year Treasury bond rates on which fixed mortgages are based also fell, and interest rates for 30-year loans plunged as far as 5.125 percent, the lowest level since spring 2004. On Jan. 1, the 30-year fixed rate averaged 6.07 percent; it has ranged between 6 percent and 6.5 percent for two years. Though the number of refinancing applications will not be available until Wednesday from the Mortgage Bankers Association, newspaper and television accounts from Bangor, Maine, to Los Angeles described a boom in activity.
What Is Fixed Rate Mortgage And Variable Rate Mortgage
Fixed rate mortgage, as the name suggests, carries a fixed interest for a certain period of time. That period is called as mortgage term. The term can usually be from 6 months to as long as 25 years. A variable rate mortgage has a fixed payment terms too. But its interest rate changes. It moves in pattern to the prevailing interest rates in the market. You pay a fixed amount, but it will be divided into interest payment and principal payment. So it follows that if the interest is high, more money goes for the payment for it instead of the principal. .
Banks engaging in anti-competitive behaviour: Choice
Australian banks and financial institutions are engaging in anti-competitive behaviour in the home loan industry, according to the consumer group Choice. Research from Choice shows extremely high mortgage exit and entry fees are often preventing borrowers from switching to a better deal on their home loan. Choice's director of policy and campaigns Gordon Renouf says these high fees are undermining the competitive interest rates being offered by independent lenders. "The problem is that if you see someone else with a quarter or a half a per cent better mortgage rate, you're going to be reluctant to change if you're going to be paying $1,000 or $2,000 to get out of your mortgage contract," he said. "It's going to take a while before you reap that money back from a lower rate." But the Australian Bankers Association chief executive David Bell says Australian mortgage fees exist to ensure proper background checks on borrowers take place.
Pre-owned home sales up 0.4% nationally
Existing-home sales rose slightly in November, a hopeful sign of stabilization in the wake of mortgage disruptions earlier this year, according to the National Association of Realtors, which performed the study. Across the nation, pre-home sales rose 0.4 percent to a seasonally adjusted annual rate of about 5 million units, up a bit from the 4.98 million units sold in October 2007. Still, the sales figures pale in comparison to the 6.25 million-unit level recorded in November 2006 -- representing a 20-percent drop. "Near term, existing-home sales should continue to hover in a narrow range, just as they have since September," said NAR economist Lawrence Yun in a statement released Dec. 31. "And that's good news because it will be a further sign that the housing market is stabilizing." Mortgage interest rates are near historic lows, and the most current data shows decelerating price declines, Yun said, along with a modest reduction in the number of homes on the market.
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