Mortgage rates continue to drop closer to 0%. These extremely low rates are coming from the Federal Reserve which is willing to take the necessary steps to keep the economy growing. The idea of “No-interest Mortgages” is still a far off fantasy, but it’s not preposterous to think of the banks offering 2% or 3% rates.
One expert, Mortgage planner Jim Sahnger, doesn’t think it would be possible for the rates to reach 0%. Without funding he believes that it would be unethical to have a 0% rate. He believes "unless there were significant fees on the front to compensate for costs to originate, deliver, default, etc.”. That is not to say that the idea isn’t impossible; even today’s rates being at 4% seemed impossible a couple of years back.
Qualifying for these low interest loans is no small feat though. In a recent study by Zillow Mortgage Marketplace they found that nearly one-third of Americans are unlikely to qualify for a mortgage because their credit scores are too low, and only 47% of Americans qualify for the best rates. "We are in an era of historically low mortgage rates, reaching levels not seen in decades. Coupled with four years of home-value declines, homes are more affordable than we've seen for years," said Stan Humphries, Zillow's chief economist. He further states,"… the irony here is that so many Americans can't qualify for these low rates, or can't qualify for a mortgage at all."
However, the article brings up an interesting point, what if the rates weren’t just for first time homebuyers? What if they were for people refinancing loans as well? They say that in theory it would cause such a surge of mortgages that the banks would be understaffed and would have to hire more employees to help meet the needs of the people. Even if everyone couldn’t qualify for these types of mortgages it would still bring a surge in the market. So many people out there are qualify but are staying out of the market because they are scared. Although 0% loans are still a distant dream, these loans would stimulate the growth of the economy. One way would be an increase in the job market and the second in the consumer banking industry.
http://online.wsj.com/article/SB10001424052748704791004575519913915143970.html?KEYWORDS=personal+loans
…but what a beautiful dream. In a more serious note, this historically low mortgage rates seem to be a great incentive for foreigners to enter the market. It would not surprise me that immigration to the U.S. increases as well as the amount of currency been exchange for dollars.
ReplyDeleteIt would be a nightmare if these low mortgages were offered to individuals refinancing their homes. A surge of mortgages may create employment and liquidity among consumers, but it would also collapse the system and once again offer cheep mortgages to individuals who probably should not have that mortgage in the first place. As for just allowing first time home buyers to access such low mortgage rates, I think that it is risky yet very necessary in order to help the crippled housing market.
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