Interest rates for mortgages have dipped lower than what we have seen for quite some time. Additionally, there is talk that the Treasury Department is considering a push to decrease rates offered to those buying homes to below 5 percent. Although there are no rumors yet of offering those rates to those planning to refinance their homes, the consideration of such a proposal is an indication of how bad the real estate market has become. Some economists hope that lower rates and the recent drop in prices will encourage prospective buyers to purchase now, thus breathing some much needed life back into the real estate sector. Others feel that offering lower rates to prospective buyers may not provide the desired boost. Buyers are still unsure about jumping into the real estate market before it has hit the bottom. Marry that with increasing job loss and uneasiness about the current economy, and many buyers may not jump in spite of low rates.
Most of the news reports rally around the idea of getting potential buyers to start purchasing from the surplus of existing home inventory. There is not, however, much talk about the majority of homeowners in this country. Many consumers have mortgages in good standing and own equity in their properties. Those homeowners could benefit from lower interest rates, as many will want to stay in their homes and refinance. The glut of current home inventory would not be made worse by home owners who refinance. Homeowners who refinance usually do so to save money on their mortgage payments. The more money those consumers save, the more likely they are to make improvements to their homes and put money into the economy via retail and services. Any government effort to spur the real estate sector should incorporate low refinance rates. A government plan that offers extremely low rates to only buyers, however, would miss an opportunity to stimulate economic movement within the ranks of current homeowners. Those wishing to refinance are often those who have a good payment track record, good credit, and will otherwise help support this economy with solid spending habits.
A good number of consumers looking to refinance are not willing to risk that the rates increase. According to the Mortgage Bankers Association, applications for refinance at the end of November had increased by 200 percent from just the week prior. Many of those applications, however, are being denied. Lending standards have become more restrictive and home values have decreased, which has made it difficult for some consumers to refinance. Those who recently bought a property in areas that have experienced significant decreases in home values, are dismayed to learn that they now do not have the equity to qualify for a refinance. On the other hand, those who do have enough equity for a refinance, should consider locking in the low rates now. This may be a once in a lifetime opportunity.