Making accurate mortgage interest rates predictions is a real tough job. The major reason behind this is the poor calculation methods used by financial markets for making mortgage interest rates predictions. The mathematical formulas for making predictions will not succeed in making precise predictions most of the times because these formulas employ many fluctuating components in the computation process. The more advanced the predictions are, the greater chances of inconsistency the predictions will have. Thinking in a broader perspective, such financial markets are predictable.
Just consider the case of weather predictions. It will be almost impossible for you to predict, which day in a particular month is going to be the hottest or which day will have the biggest amount of rainfall. But, you can predict that the hottest day will be in a particular period of a month. As you can see with climate predictions, mortgage interest rates predictions also prove to be correct in a broader sense.
There are lots of factors behind the rise in mortgage interest rates. Inflation is one of the major factors. Real interest rates are not dependent on inflation. The supply and demand decide there in the financial markets. The banks impose nominal interest rates on the mortgages you make. If you add up the real interest rate and the annual percentage rate of inflation, you will get the nominal interest rate.
The availability of credit is another important factor, which contributes to the rise of mortgage interest rates. When the availability of credit is not enough, it will result in the rise of mortgage interest rates. Mortgage rates predictions depend upon the supply of money. According to the changes in the supply of money, predictions will vary. The influence of demand for money is also quite apparent.
Apart from the factors described so far, the amount of risk involved is also an unavoidable factor in the determination of mortgage interest rates. Whenever the housing market faces a slump or looks shaky, the chance is that the mortgage interest rates will rise. And, as a direct consequence, mortgage interest rates predictions will show increased rates.
Factors that result in a fall in the mortgage interest rates include the policies adopted by the ruling Government could influence the mortgage interest rates. For instance, the US Government issued Treasury bonds at different interest rates. This will have a damaging effect on the overall market for money. And, as a result, the real interest rate will be influenced.
Mortgage interest rates predictions may point at a possible rise in the interest rates when it is done by keeping only the economy in mind. But, when there is political pressure, as in an election year, the ruling government will ensure that the interest rate remains stable until the election is over. Once the election is over, things return to normality, i.e. interest rates will be influenced in the same manner as it was before. The mortgage rates predictions are always made considering the political situation prevailing at the time of making the prediction.
In the US, mortgages above the industry standard definition of conventional loan limits are referred to as jumbo mortgages. Fannie Mae and Freddie Mac, the two largest secondary market lenders, set these mortgage standards. Jumbo mortgages are offered by seller services of wholesale institutions and Wall Street conduits that are responsible for providing warehouse financing to mortgage lenders. These mortgages become applicable when agency limits are not able or willing to cover full loan amounts.
These large agencies can purchase the volume of residential mortgages in the US and set limitations on the maximum dollar value of a mortgage they purchase from private or individual lenders. Loans more than $650,000 are referred to as jumbo mortgages and their interest rates are typically greater than normal mortgages. These interest rates, however, vary depending on the mortgage amount and property type.
Originally, 40-year loans were the first to hit the market as jumbo mortgages. However, recently 50-year mortgages have begun to hit the market. These mortgages are however limited to ALT A and sub prime lenders. Sub prime lending has especially had popularity due to the recent credit crunch that hit the country. This lending applies to borrowers who have a history of default of loan delinquency. It is also applicable to those who have a limited debt experience or a recorded bankruptcy.
A credit score of below 660 will put one in a position to get a sub prime loan and thus be in line for a jumbo mortgage like a 50-year mortgage. 50-year mortgages are applicable where properties cannot be sold on primary markets. 50-year loans currently on the market either are in form of fixed rate
50-year mortgages provide more monthly savings than typical 30 or 40-year mortgages. However, they have a downside, where equity is built slower than in other jumbo mortgages. These types of mortgages are suited for people who intend to keep loans for 5 years or so. Either many companies that offer jumbo loans have attractive incentives that help attract clients who are loan defaulters or who have low credit points to qualify for average short-term loans.
Some companies offer these loans with a credit score as low as 550 with a loan amount exceeding $1 million. However, these mortgage loans pose a higher risk for lenders. As a result, they will request a higher down payment from loan seekers to cover the market highs and lows commonly associated with luxury residences under a 50-year mortgage.check more info from http://www.miamiherald.com/news/business/banking/article54968560.html
50 year mortgages are more subjective, and these properties are not easy to sell. Thus, lenders will request two evaluations on a mortgage loan.
Recent trends on these loans have been positive due to an increase in housing prices. Loan options even allow a borrower to defer payment for a few years enabling him or her save on monthly payments. Read top article.These attractive payments options are however limited based on the percentage equity that a borrower attains or after a number of years. Thus, carefully reviewing the loan requirements and contract details will help a borrower make the right decision.