2011 Mortgages Trends
Posted Under: Mortgage Rates
It is expected that for the year 2011 mortgages will rise due to the increase in interest rates. As such, financial experts suggest that individual borrowers should apply for new mortgage loans or refinance their home loan immediately instead of attempting to time the market. Despite such advice, there are risk takers who are willing to wait close to the closing period to secure a low mortgage interest rate, while others observe general mortgage market trends, focusing more intently on their own finances. However, predicting a specific mortgage rate for a particular time is extremely unlikely. Nonetheless, there are real estate market observers who have identified a few trends they believe will influence the mortgage market throughout the year.
One such trend is the slow rising of mortgage rates which, The Mortgage Bankers Association (MBA) anticipates will rise to as much as five percent in 2011. Such was, predicted by the economist Holden Lewis of Bankrate who stated that mortgage rates would rise by the Q3 of 2010, of which it did by the quarter just above five percent. While this increase is historically low, it does not favor homeowners.
Secondly, an increase of such will influence a decrease in the overall demand of mortgages as further predicted by the MBA, driven by subdued economic growth and a lack of consumer confidence.
Thirdly, as predicted again by the MBA mortgage refinancing applications will decrease below forty percent. Mortgage refinancing applications accounting for about 80 percent of all mortgages written in 2010. Furthermore, the percentage of qualified homeowners will also decline.
Notwithstanding that the mortgage loan process will remain slow and complicated. Holden Lewis at Bankrate says even if the numbers of loan applications declines, lenders anticipate that the time between application and mortgage closing will continue to take as much as 60 days. As such many lenders recommend that the time period to secure a loan be extended to as much as ninety days to ensure completion of the loan process.
All these implication or trends will result in a larger portion of the market being filled with mortgage applications for a home purchase. The MBA further predicts that stabilizing home prices and small increases in home sales will cause an increase in the number of mortage applications.
On the other hand the use of cash will proceed all on a major scale. Lawrence Yun, the chief economist for the National Association of Realtors (NAR), says that about a quarter of all existing home purchases during the fourth quarter of 2010 were all cash purchases. Hence, he anticipates all-cash purchases to continue to represent a significant portion of the market in 2011.
While this is happening, consumers will seek attractive alternatives, one of which will be Jumbo loans. As history recalls, in 2009 and earlier in 2010, mortgage rates for jumbo loans (loans over $417,000 in most housing markets and above $729,750 in high-cost housing markets) were far higher than mortgage rates for conforming loans. In the final quarter of 2010, mortgage rates on jumbo loans decreased, which will result in an increase of loan applications.
While these trends will change the real estate market, homeowners and homebuyers should seek information from lenders regarding the cost and availability of loans so as to his or her needs.
