Will Current mortgage rate sustain its level?

The blue ink on 2009 Stimulus Bill by President Obama has marked a new chapter into the lives of millions of Americans who have slipped into defaulter status due to various reasons beyond their command. Due to the Federal Loan modification program included in the Bill the current mortgage rate (30 year fixed rate mortgage) has fallen to a level of record low in last 38 years. The Federal Reserve Bank of New York plans to buy mortgage backed securities worth $1.23 trillion.

According to some sources, the current mortgage rate on 30 year loan is 4.71 percent (as on Friday, 4th Dec, 2009). This current rate has experienced a fall of about 0.07 percent than its previous week’s rate. Though it may not seem to be a great dip, yet when compared with the last year’s rate one can easily find the difference. Last year during the same time of the year the average rate was 5.53 percent, whereas the current rate is only 4.71 percent. But irrespective of the percentage of rates which have gone down, one can be sure of some great relief with these dip in rates. Be it a homeowner facing a foreclosure or a debtor with heavy loans, a sustained level of this low rate is a welcome idea for all.

Though we are talking about the sustained level of this rate yet we should know that the lowest rates are offered to creditworthy customers who can make some sizeable amount of down payment. So, at the time applying one should be careful about the down payment rates. Sticking to the best possible amount of down payment is a safer option. Yet it may not be the thing required to get the best rate. Here, it is advised not to judge the mortgage rate by only the interest rate and the points involved. It is really not enough. Along with these one should look for the fees involved in the process.

Coming back to our discussion whether this low level of current mortgage rate will sustain or not, we should think about the main factor causing this fall in rates. As per the discussion above, it is purely because of the initiatives of the Federal Bank. The Federal Reserve rates vary depending upon market conditions. It makes rate decisions depending upon the some indexes like consumer confidence levels, unemployment rate, consumer price index etc. And the signature of Obama in the Stimulus Bill which is somehow related to this rate has saved some further percentages. But the Program is not devised to be there whole life. By the September next year, one can expect some rises in this rate. Federal Reserve said that it would gradually wind down the purchase plan of mortgage backed securities and relative items. Though Fed sys it to be a year or less for this rate to sustain, yet some experts believe that it would deteriorate by next coming 30 – 40 days.

So, with this proximity that the current mortgage rate will sustain for a period of about one year, now is a good time to buy a home.