30-Year Mortgages Hit Another Record Low
For more than four decades, the U.S. Government has been subsidizing the cost of houses and boosting home ownership. However, just recently, there have been rumors that the government plans to back away from this. The administration of Obama wants to remove the federal guarantees with regards to home loans for everyone. This is according to a report given to the Congress last February.
A change similar to this can definitely make mortgages more expensive than ever before. It is a fact that the favorite home loan of Americans is the 30-year, fixed-rate mortgage, but with the current state of the market, it will surely lose ground compared to other types of mortgage. Some experts even believe that a 30-year mortgage can probably go extinct, but this is very unlikely.
Because of the steps taken by the Obama administration, the number of 30-year mortgages will decrease, but will not totally disappear. As of the moment, these things are not concrete yet since these are just rumors heard all over the place. Rumors keep spreading like wildfire regarding the elimination of the Fannie Mae and Freddie Mac, considered as two of the biggest government corporations which are responsible for keeping the cost of homes manageable through guaranteeing home loans.
There have been massive nonpayment noted on homeowners, as well as internal scandals at Fannie and Freddie, which then cost billions of dollars for taxpayers. That’s why those certain steps need to be taken, somewhat a new approach is needed. However, before actions will be made, a long argument between politicians, economists, consumers and other concerned individuals or parties will take place.
On the other hand, the homeowners tend to question, what could possibly be the effect of these changes when it comes to the current mortgages and the long term results of such actions? In today’s time, almost 80% of the mortgages that Americans have are 30-year, fixed-rate, conventional loans. By conventional, this means that Fannie and Freddie can guarantee the home loans. This type of mortgage is basically cheaper compared to other available options. Through dividing the payments in a longer period of time, the conventional loans are pricier in the long run. Still, it is the best option since it allows people to buy a home.
The usual rate of the 30-year, fixed-rate mortgage decreased this week to 3.66%, right from 3.71% on the previous week. This is according to the latest Freddie Mac’s survey of lenders. Two weeks ago, the lowest accounted rate is 3.67%. The said survey asked the lenders about the terms being offered for particular types of loans, including this popular 30-year mortgage.
To decrease the risk of financial problems in the future, people are encouraged to take an alternative mortgage or home loan, just like the 15-year mortgage. Although it might seem more expensive compared to the 30-year mortgage, it still puts the buyers on a better advantage, that’s for sure. Years from now, with the steps taken by the government, the 30-year mortgage will still exist, however, the prices will definitely be higher.