In the run-up to the global economic recession that coincided with a major U.S. housing market crash, everything was coming up roses for consumers. Everyone and their cousin, to use the colloquialism, seemed to be eligible for homeownership, and it was not unusual for paperless applications to go through.
It was, so to say, a very “decadent” period for the mortgage market, and when the bubble did eventually burst, the housing market did an about-face, with lenders requiring only the best credit and following extremely restrictive guidelines, and mortgage interest rates rising quickly. This made it especially hard for first-time buyers to enter the market, as well as existing homeowners hoping to refinance their property and reduce their monthly mortgage payments.
Things have changed as the housing market emerges from a mixed 2014 and enters a brand new year. Home price hikes, which were so instrumental in keeping first-timers out of the market, are now more realistic than they were. Mortgage rates have also declined substantially from their year-ago levels, and are now at 20-month lows on most surveys. With the FHA, Fannie Mae, and Freddie Mac having launched new changes designed to benefit entry-level customers and first-timers, there has not been a better time to buy a new home or to refinance in quite a while.
In its index report for quarter four 2014, Fitch Ratings revealed that the average rate for 30-year fixed-rate mortgage products is now at 3.66 percent, a 20-month low and a level that is 92 basis points lower than the highs reached in mid-2013. “Conditions are very favorable for first-time homebuyers to start getting back into the market,” said Sean Nelson, director of Fitch Ratings. “Mortgage rates are falling, FHA insurance premiums are coming down, home prices are cooling and employment is steady.”
Recent data seems to back up Fitch’s optimism for the 2015 calendar year. Months prior, the Mortgage Bankers Association’s data showed the refinance share of mortgage activity teetering around the 50 percent mark. As per recent reports, that figure is now up to about 70 percent.
And there have been several economic reports showing home purchase activity ticking up in the latter parts of the year, which is in contrast to previous months, when a lot of consumers found the rapid rise of home values to be overwhelming. While Freddie Mac’s latest mortgage rate survey showed 30-year FRMs moving slightly higher, interest rates remain very close to historical and 20-month lows alike.
As for government agencies and their mortgage market reforms, these include the FHA reducing the mortgage insurance premiums from 1.35 percent to 0.85 percent, and Fannie Mae and Freddie Mac reducing minimum down payment requirements to 3 percent for qualified home buyers. For the former move, Fitch echoed the FHA’s promise that consumers can save about $900 per year on an average, though there have been separate reports, including one from RealtyTrac, that show insurance premium savings could be well in the thousands, depending on a consumer’s home market.
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