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What You Need to Know About the Current Mortgage Market

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Since the economic crisis began, we have see a very volatile mortgage market. The likes of Fannie Mae and Freddie Mac usually sharing articles and story space on news sites and papers alike throughout the past year. As we entered into 2013, we even saw some major changes coming to the current mortgage market. With so much new information available each day on the current mortgage market, the housing industry and other pertinent aspects it’s important to get your facts straight so you know what to prepare for as you go into to purchase a new home, apply for a loan, or even consider refinancing your home. The market is not the same as it was a few months ago, let alone the state it was in previously. Here, we’ll tell you some of the most important factors and facts that you should know about the current mortgage market.

(Photo credit to:

(Photo credit to:

Recent Developments in Current Mortgage Market

In recent weeks the mortgage market has received it’s fair share of the spotlight with announcements regarding guarantee fees and President Obama’s plans for the current mortgage market. First, let’s take a look at Freddie Mac’s announcement of cutting it’s guarantee fees as they continue to lose market share to Fannie Mae. A guarantee fee is charged in order to accrue the necessary finances that have risen from mortgage default. Fannie Mae has yet to announce it it will do the same to match Freddie, though if Fannie does it means that the fees will be passed onto consumers while paying a little bit less for their mortgages.

Mortgage backed securities have been taking a beating lately, Freddie Mac recently reported the highest 30-year fixed rate mortgage in almost 2 years. There’s currently a lull in major economic changes and meetings (though we’re bound to see some new housing data and the Fed’s committee minutes soon) there’s two likely options for the mortgage market. For the time being, the current mortgage market will either receive a short time to relax and catch up, or will be a victim to the momentum gained from last week’s losses. Economic data is still very mixed, and what makes market timing even more difficult is the lack of notice for the Fed’s stimulus taper.

(Photo credit to:

(Photo credit to:

As for President Obama’s recent announcement, he wants to change the fact that the U.S has a non-existent mortgage market. Current mortgage market has the government supporting almost 90% of newly issued mortgages through government programs like Fannie Mae, Freddie Mac, the Federal Housing Administration and more. Obama wants to put a majority of the default risk on investors rather than the government. The major problem with this is the 30-year fixed rate mortgage service. Its a very steep commitment that many banks would absolutely refuse to take on. While we are puzzled with how Obama plans to resolve this issue, the rest of the speech offered no real plan, leaving this idea’s strategy very broad.

With the Current Mortgage Market, Is It a Good Time to Buy?

With the guarantee fee cuts from Freddie Mac, many housing market professionals are fearing an overly competitive real estate market. Though this would not be an issue in other business aspects, the real estate market cannot house a competitive mortgage market. This type of market results in thin margins which can yield dramatic results in dire market conditions. These thin margins can be destroyed in no time by a widespread decline in house prices or by seizing up capital markets that have nothing to do with housing.

Even though the mortgage rates are low enough to make buying a home look appealing, consumer affordability has declined. There are less purchase and refinance applications being submitted according to a weekly survey by the Mortgage Bankers Association. The increasing mortgage rates combined with rising home prices have contributed to why affordability is at the lowest level it’s been in over four years. There are even homebuyers who are not qualifying to borrow as much because of higher mortgage rates. In the current mortgage market every percent increase to a 30-year fixed rate mortgage on average loses approximately $24,000 you have in borrowing power. This is why so many mortgage and housing professionals urge homebuyers to lock in a rate as soon as they find the home they want. Trying to time the market will only hurt you now, causing to pay more in delays and fees.

What Can We Expect for the Future Mortgage Market?

At this point, it’s hard to say what we can expect from this current mortgage market status. It all depends on Obama’s plans to transfer the default risk to investors and off of government programs. Another factor the market is depending on is the Fed’s stimulus taper plan. As you can see there are plenty of different factors that can greatly affect the current mortgage market and it’s future. Our advice to you is to not wait for a decreasing rate. If anything, the rates will likely stay where they are for now, and continue to slowly increase as the year progresses.

How have you been affected by the current mortgage market? Let us know!

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