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How Low Interest Rates Will Affect the US Real Estate Market?


October 31, 2012  | Insights


The recent unorthodox decision by the US Federal Reserve (Fed) to pursue a policy of “quantitative easing” suggests that interest rates could remain relatively low for the long-run.  The aggressive attempts of the Fed to stimulate the economy through purchasing large amounts of bonds and assets targeting the mortgage market lead many analysts to speculate that there is no better time than now to purchase a home in the US. This Loan-America analysis will highlight some decision criteria for potential consumers to consider when assessing home ownership in the near or long term.

Though factors can shift to make home buying more or less attractive, the most important factor to consider at this time is the historically low interest rates, which helps significantly increase consumer purchasing power. Though the Fed has most recently used strong rhetoric to state they would extend plans to maintain interest rates at ultra-low levels through into mid 2015, consumers should keep in mind that government support will not be indefinite and is heavily policy/politics dependent.[1] When the economy begins showing signs of recovery, the Fed will eventually cease its asset purchasing program, surrendering the housing market more-and-more to the forces of the private sector. Such a reality could be dramatically sped up in the event of a Republican Romney-Ryan 2012 Presidency since traditional free-market Republicans like Mitt Romney and Paul Ryan strongly disfavor heavy government intervention in the market. In this case, the private sector will demand higher interest rates to assure against their risk premiums. Either a slow easing of the Fed’s support or a drastic policy change resulting from a new Republican Presidency could put upward pressure on interest rates, in turn significantly reducing consumer purchasing power.

Securing financing in the future may also be more difficult than the present. Since the financial crisis, many banks have begun tightening their requirements to access credit for a mortgage. To counteract this, Congress has been guaranteeing 90% of the mortgages on the market to spur consumer confidence. Conventional wisdom suggests that as the recession recedes banks will begin to loosen stringent requirements and provide more consumer credit. Consequently, Congress will also begin re-thinking the extent to which it intervenes in the market. If government is less prepared to underwrite mortgages, the private sector will most certainly require greater collateral to help secure access to credit.

Lastly, many analysts speculate that the aggressive level of government intervention in the market will yield high levels of inflation. Inflation normally drives up nominal wages. If consumers secure a low fixed interest mortgage on a new home prior to inflation rises, they are making a smart investment as their mortgage payments will be more affordable.

Given the level of uncertainty in the economy, this analysis mostly supports purchasing housing for residency rather than investment purposes. All things considered, the benefits of securing a long term low fixed rate mortgage or switching from a variable mortgage to a low fixed rate to take advantage of the depressed rates appear to greatly outweigh current risks. 

For more information about how to take advantage of these low interest rates in the California region or other guidance about the right products for home buyers, please call 1-888-LOAN-800 to arrange a consultation or visit us at We’re a trustworthy Californian mortgage company helping ever day consumers refinance their mortgages and make smarter real estate decisions.




Low interest rate makes many people to get easy finance help for the real estate property.. as this rule is good like in japan people purchase things when their cost is low... Independent Duplex Premium villas in Jaipur
Posted @ Thursday, September 25, 2014 11:25 AM by James Eme
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US Mortgage Rates at All Time Low – Great News for Consumers

September 14, 2012  | Insights

In today’s US real estate market, mortgage rates are hovering near record lows, some claiming these to be the lowest in nearly a century, which bode well for prospective new buyers or re-mortgaging consumers.[1] 

The mortgage rates for the week ending Sept.13, 2012 include the following:

-  30-year FRM averaged 3.55 percent this week, unchanged from last week. Last year at this time, the 30-year FRM average was 4.09 percent.[2]

-  15-year FRM this week averaged 2.85 percent, down slightly from last week's average of 2.86 percent. One year ago, the 15-year FRM averaged 3.30 percent. [3]

Mortgage Rates 30 year

Factors contributing to keeping US Treasury bond yields low and, in turn, interest rates at unprecedentedly low levels include turmoil in world economy, investor concern with the European debt and bond markets, and a shaky economic recovery back in the US.

In addition, just yesterday, the Fed announced a new policy – “quantitative easing” – meant to stimulate the economy through a round of bond purchases targeting the mortgage market. This entails the central bank purchasing $85 billion in bonds per month through the rest of the year, and then $40 billion per month indefinitely until the economy requires less support.[4] The policy is intended to continue driving interests rates even lower to help support lending, borrowing and spending.[5] The Fed also supported their policy with strong language claiming they would extend plans to maintain interest rates at ultra-low levels through into mid 2015, and continue supporting the economy “for a considerable time after the economic recovery strengthens.”[6]

What does this mean for consumers and prospective buyers? Well, consumers should look to take advantage of the low rates by getting into the market or re-mortgaging their current deal to lock in at a lower fixed rate as soon as possible.

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