Better Mortgage Conditions Emerge from the Bad News

By Richard Barrington Columnist

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Don't look now, but just as the news about the mortgage industry seemed to be at its worst, conditions actually got better for mortgage borrowers interested in refinancing or debt consolidation.

As bad as the headlines were, mortgage rates showed a slight turn downward, possibly beginning to reverse a trend which had seen mortgage rates rise throughout most of 2007.

Trend Toward Rising Rates Reverses

As recently as early May, 30-year mortgage rates were down as low as 6.15% before spiking upward. By mid-July, 30-year mortgage rates were hovering around the 6.73% mark.

Higher mortgage rates effectively choke off opportunities for borrowers to save money via refinancing or debt consolidation, as they make current rates less of a bargain. Overall, higher mortgage rates have been a drag on the mortgage market in general.

Self-Correcting Trend Rewards Patient Borrowers

The silver lining here is that when the economy weakens, interest rates typically fall. This was reflected most immediately in the bond market, but the direction of mortgage rates is generally influenced by bond rates. By August 9th, 30-year mortgage rates had come down to 6.59%.

So far, this is only a slight decline from the peak in rates, but if it is truly a reversal of the trend, be prepared for refinancing and debt consolidation opportunities to start to look attractive again. The economy can often be self-correcting, and that's what might be at work here. As mortgage and housing weakness has started to affect the economy as a whole, interest rates have begun to ease. If those rates continue to ease and mortgage rates follow suit, it could add some support to the mortgage and housing markets. The beneficiaries could well be those who've kept their finances strong enough to ride out the storm.

Freddie Mac

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.

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