High Mortgages Benefit the Housing Market

Statistics from Freddie Mac states that the average of 3.63 percent mortgage rate for 30 years is, by far, the highest recorded in six months. But as much as it is painful for Americans to see, it is actually a sign of an improving U.S. economy.

In fact, analysts at Freddie Mac say that the mortgage rate will go even higher as the economy recovers. This may make home buying a lot more expensive for consumers but this drives the construction rates as well as bank and online loans too. Moreover, it drives the saving rate low, which is another good thing because consumer spending makes up about 70% of the economy.

In the past several years, the mortgage rates were quite low because of the regulation done by the Federal Reserve. The Fed has been buying bonds and in effect, protecting homeowners from the high mortgage rate. How did that happen?

The Fed released funds for banks to use as loan money. With the availability of funds, homeowners are encouraged to apply for loans and there is a higher probability of getting approved. Some homeowners had even opted for refinancing to take advantage of the low mortgages offered. The Mortgage Bankers Association revealed that there have been 71 percent of all mortgage loans were refinanced in 2012.But with the withdrawal of these funds, banks became more stringent and approved some applications.

Loan Alternatives for High Mortgage Loans

University of Miami finance professor suggests home buyers should not wait for the mortgage rates to drop before they decide to buy. If they are looking for the best means to save, the current rates are good enough to take advantage. Anyway, there are non-traditional financing institutions offering bad credit loans that ordinary employees can use to get the needed mortgage money.

These bad credit loans are offered regardless of your credit history so you know that you get to keep your home, no matter what because you can still afford the mortgage. However, financial experts exert the need to pay these loans on time since these are only short-term.

But no matter how consumers define the high mortgage rates, it would always mean that the economy is doing well. As businesses secure more loans, it generates more jobs that mean a great future for the U.S. economy. Additionally, it could bring more serious purchases back to the housing market. Most importantly, it boosts home sales.