Mortgage Rate Review

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 5.97 percent in March from 5.92 percent in February; the rate was 6.16 percent in March 2007. Source: National Association of Realtors^® press release, April 22, 2008.

Lawrence Yun, NAR chief economist, said yesterday that the mortgage market is performing unevenly.  “Though mortgage rates are at historically low levels, some borrowers are facing restrictive lending practices in declining markets,” he said.  “At the same time, many buyers continue to bide their time with a large number of homes to choose from, while other potential buyers remain on the sidelines.” In other words, the real estate market is slow even though mortgage rates are great.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said there are problems with the implementation of mortgage guidelines.  “It appears there is some over-reaction on the part of some lenders now in requiring higher down payment percentages than may be necessary,” he said.  “On the other hand, buyers in many parts of the country are able to take advantage of more lenient policies for FHA loans.  However, because lenders don’t have enough underwriting experience with FHA loans in high-cost areas, there are localized bottlenecks in loan processing.” Consumers should make sure their mortgage lender is experienced and on top of the latest developments in the market.

Yun offered a caution:  “With elevated inflation, the Federal Reserve should be extra careful about further rate cuts,” he said.  “Mortgage interest rates, which do not move directly with Fed funds rates, may rise measurably and hurt the housing recovery if inflation gets out of hand.”