Categorized | Finance and Mortgage

Low Mortgage Rates Misleading

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For the past month or two, mortgage rates have continued to drop to record-low levels. While the record low rates have continuously been a popular topic of discussion, the truth is that they may not be all that they are touted to be.

Analysts and lenders alike cite the low rates as being a legitimate reason to consider now the best time ever for homebuyers to enter the market. However, that may not actually be as true as both groups would like one to believe.

While rates are at incredibly low levels, they generally are not going to those homebuyers that could truly benefit from them. Furthermore, the actual rates that most borrowers are receiving are actually higher than reports indicate.

In general, the average mortgage rate should be similar to that of the ten-year treasury rate. However, the current mortgage rate is far higher than the current 10-year treasury rate. In fact, the ratio between the two is far higher than it has ever been in recent memory.

The majority of those that are benefitting from the current low mortgage levels come from households with higher incomes.  These are generally the borrowers that don’t need the low rates, and would experience the least benefits from them.  The four major banks that handle the majority of mortgage refinancing applications have implemented standards that essentially prevent those with lower income from refinancing. Many of those with lower income are also facing underwater mortgages, which essentially disqualify them from being able to refinance.

The United States government is hoping to implement new measures that will make refinancing more obtainable for all Americans, though there is little hope that such measures will be passed anytime in the near future.

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About Drew Wilson

Drew focuses on the Commercial and Mortgage/Finance categories.

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