Mortgage Rates lower, Activity Rises

Mortgage interest rates have lowered in recent weeks, motivating more people to buy and finance a home now or refinance their existing mortgage before rates start climbing again. On July 1, the average mortgage rate is down to 5.53 percent for a 30-year, fixed-rate mortgage (per Freddie Mac). Last year at this time, the average rate was 6.25 percent. However, nearly all analysts agree that the future prognosis is for rising rates. Mortgage rates have declined despite the steady boosts in short-term rates determined by the Federal Reserve. The Fed rate again increased by a quarter point on July 30 for the ninth straight time within a year -- a year to the day after its first rate hike. It now stands at 3.25 percent. "Existing home sales are now at the second highest level ever recorded, suggesting the housing market still has a good head of steam," said Frank Nothaft, Freddie Mac vice president and chief economist. "As a matter of fact, mortgage rates fueling the vibrant housing market are even lower now than they were a month ago. We fully expect the housing market will continue to thrive well into the foreseeable future." Realizing this low rate trend can't continue long, many consumers are taking action to buy a home or refinance their mortgage. Another motivating factor is the wide choice of mortgage plans that are now available to borrowers. It ranges from interest-only mortgages to hybrids and conventional 30- and 40-year term loans. Also, an increasing number of homeowners are now taking advantage of today's low rates by launching a needed remodeling project and financing it with a home equity loan or line of credit. In some cases they refinance their existing mortgage for a new cash-out mortgage that will provide funds for remodeling while reducing their overall interest rate.