30 Year Rates - The Present and the Future

2007-10-31 14:36:21

( Financial )



Basic Structure of 30 Year Mortgages

The 30 year mortgage is the most basic and popular type of conventional loan. In a 30 year mortgage loan, most of the amortization is composed of interest charges, and only a small portion is the principal. This type of mortgage is also secured by real estate properties, so it assures lenders of a steady source of interest income. The lender or mortgagor has liens to the property that secures the loan, as long as the loan remains outstanding.

You can choose whether to borrow based on a fixed or adjustable rate basis.
Fixed or adjustable, 30 year rates are generally based on trends in the economy. The rates are also affected to some extent by the volume of borrowers and available funds for lending.

Current Trends for 30 Year Mortgage Rates

During the past five years, lenders have taken great risks and extended loan opportunities even to sub-prime borrowers who could not maintain timely loan repayments. This phenomenon has caused a sudden rise in foreclosures as well as severe financial losses for creditors. The adverse situation has even spread to other categories of credit facilities such as student loans and credit cards.

As a result, lenders are currently very cautious about selecting loan applicants and have imposed tight qualifications. Tighter loan terms have caused slumps in lending activities, and this in turn has pulled down the prevailing 30 year rates, averaging only around six per cent.

In fact, federal banking authorities have recently announced further cuts in interest rates in order to prevent an economic recession, and to boost more lending activity.

The Future for 30 Year Rates

Lenders have come down hard upon all borrowers, but the low interest rates may have to stay just to ease the burden. However, lenders may also resort to charging higher points and one-time service fees to make up for the low interest income.

On the rosier side, these rock bottom 30 year rates have also sparked new opportunities for potential home buyers who can meet the stringent requirements of lenders. If you can qualify under today's 30 year rates, you can save a lot in interest charges until you are eligible for refinancing packages or other loans with less stringent terms.

The current slump may also clear the air for more responsible types of borrowers who will eventually bring back profitable times for lenders in the coming years.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.