Fixed rate mortgages have allowed Americans to dream of owning their own property; the security that these mortgages provide is a solid stabilizing aspect which enables people to make up their minds on going for a loan.

The lure of adjustable rate mortgages lies in the fact that you save when the interest rates go down; but when the rates start moving up it can have a negative effect on your monthly outgoing and also your lifestyle. If, for any reason, you are unable to pay your monthly mortgage you’re in trouble. You could get into a vicious cycle of borrowing from one lender to pay another.
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Understanding interest rates is an important part of finding the right mortgage for your home. Making informed financial decisions requires doing your homework; here are the basics of mortgage interest rates. Mortgage interest rates come in two flavors: fixed rates and variable rates. Fixed interest rate mortgages do not change their interest rate for the duration of the loan. Adjustable rate mortgages change at regular intervals. Both types of interest rates have their pros and cons.

Fixed Rate Mortgages

The main advantage of a fixed rate mortgage is simply that this interest rate does not change. Homeowners with fixed interest rate mortgages have the peace of mind in knowing that their monthly payments will not change when interest rates go up. The disadvantage of a fixed rate loan is that these mortgages come with higher interest rates; you will pay a premium for this peace of mind.

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This week, again the mortgage rates dropped down a little. Experts believe that the main reason behind the fall in the mortgage rates is the market’s concern for the slower economic growth during the next few months. The market is also worried about housing slump and how long the market will continue to suffer because of this. These worries were raised due to the recent report of October, which explains that there is some regional manufacturing weakness.

Last week the average interest rate of 30 Year Fixed Rate Mortgages was 6.40 percent. This fell down to an average of 6.33 percent for this week. Last year at this point of time the average interest rate of 30 Year Fixed Rate Mortgages was 6.40 percent.

This week the average interest rate of 15 Year Fixed Rate Mortgage is 5.99 percent, lower than 6.08 percent of last week. A year ago the average interest rate of 15 Year Fixed Rate Mortgage was 6.10 percent.

This week the interest rate of the 5 Year Treasury indexed hybrid adjustable rate mortgages averaged 6.03 percent, lower than 6.11 percent of last week. Last year at this point of time the average interest rate of 5 Year Treasury indexed hybrid adjustable rate mortgage was 6.14 percent. (read more…)

The Federal Reserve’s recent bid to boost the economy by cutting interest rates has apparently backfired when it comes to mortgages. Mortgage rates are rising instead of falling, with Bankrate.com reporting average 30-year rates added 0.1 percentage points yesterday to hit 6.08 percent.

“The question is: ‘Did the Fed cut too far?’ ” Bankrate.com’s Greg McBride said.

The Fed last week sliced a sharp 0.5 percentage points off of the key federal-funds rate, which banks charge each other for overnight loans.

But while cutting the federal-funds rate directly impacts short-term borrowing like credit-card debt, it doesn’t automatically affect long-term loans like mortgages.

Instead, banks generally base mortgage rates on 10-year U.S. Treasury bond yields, which have risen 0.23 percentage points in recent days.

McBride said Treasury yields have gone up because some bond investors fear the Fed cut short-term rates too much, risking inflation. (read more…)

Rates on 30-year mortgages fell this week to the lowest level in three months. Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages averaged 6.45 percent. That was down from 6.52 percent last week and was the lowest level since the week of May 31, when rates stood at 6.42 percent.

The moderation provides welcome news for prospective homebuyers, many of whom are finding it harder to obtain loans as lenders tighten up on borrowing standards in the face of rising loan delinquencies.

Rates in other mortgage categories were mixed last week.

Rates on 15-year fixed-rate mortgages, a popular choice for refinancing, averaged 6.12 percent, down from 6.18 percent last week.

But rates on five-year adjustable-rate mortgages, rose slightly to 6.35 percent, compared with 6.34 percent last week.

Rates rose more steeply for one-year adjustable-rate mortgages, climbing to 5.84 percent, up from 5.60 percent last week.

The big drop in 30-year mortgage rates followed the Aug. 17 decision by the Federal Reserve to slice its discount rate, the interest it charges to make direct loans to banks. That move was designed to calm recent turmoil on Wall Street about a spreading credit crunch. (read more…)

Few days back, one of my friends was looking to mortgage a house in Santa Barbara. He had already found a house in Santa Barbara, that he really liked. So getting mortgage loan offers was the next thing (and he needed the offers quickly). He researched for the options on the internet (on websites like www.estreetloans.com) and found that interest only mortgage was the one that best suited him.

He discussed this with others and finally went for interest only mortgage for his Santa Barbara house.

But what is this interest only mortgage?

Interest only mortgage is one popular option where you need to pay only the interest component of the mortgage loan for the first few years. (read more…)