What are the current best mortgage rates or mortgage rates predictions today? The impact of the mortgage crisis makes mortgage rates forecast and mortgage interest rate predictions tough to measure.
What was behind the credit crisis that brought down such established names as Bear Stearns and Merrill Lynch? Are we still reeling from it? Most importantly, can we recover from this nightmare of free for all lending?
In hindsight, the main factor behind the mortgage rates predictions and credit crisis was the collapse of the "American dream". The credit crisis brought two groups together, homeowners (Main St.) and wall street investors (China, Japan, Middle East, Pension Funds, Insurance companies, Mutual Funds, Investment Banks, etc.). Homeowners represent their homes and Wall Street investors represent their money.
Usually investors secure their money in US Treasury Bills (T-Bills) believed to be the safest investment with a triple a bond rating (AAA). After September 11, 2001, the Federal Reserve chairman Alan Greenspan lowered interest rates to 1% to keep the economy healthy.
The investors say no thank you and choose to invest their money somewhere else. On the other side, banks can borrow money from the Federal Reserve for only 1%. Add to this the money Wall Street investors were willing to invest (now that they weren't investing in treasury bills) and you have an abundance of cheap credit. This made borrowing money easy for banks and caused them to go crazy with leverage.
Regional and Local Banks started making more loans to people requiring little in return because they were just going to sell these loans to Wall Street investors anyway. In their mind, it wasn't the bank's problem anymore. The banks made a profit on the upfront points from the homeowners and the sale of the loans.
As people vied with each other in buying property they could not afford, they borrowed money to meet their aspirations. Several factors combined to make this dream come true.
Current best mortgage rates were at an all time low. In fact, they were at a 30 year low in 2007, several years after September 11, 2001. This translated into lower monthly payment for people who borrowed money from banks. The rapidly increasing prices of property only fueled the need for properties people couldn't afford!
Unfortunately, it did not stop there. Before long came a huge increase in refinances. More and more people were using the equity in their houses to simply lead an extravagant life they couldn't afford. Mortgage interest rate predictions were still at an all time low.
The worst part of this was that people, who did not deserve high risk mortgages, got them anyhow! Even people who would not receive credit under normal circumstances now got away as subprime borrowers. It was a disaster waiting to happen and the clock was ticking!
As Wall Street money fueled the "party", the toxic subprime mortgages spread to just about every financial institution. That is the reason why the ultimate collapse brought down some of the best names in the banking business, even ones that didn't take part in subprime loans.
Interest rates rose and mortgage rates predictions were everywhere. Banks could not even foreclose and get their money back. As the noose tightened over an already reeling economy, big businesses declared bankruptcy in a few days and closed their doors for good.
The spate of initiatives meant to tackle the bleak economic scenario had an impact. Mortgage rates forecast fell again and at less than 5%.
However, recently there has been a steady rise in the current best mortgage rates all over the world. Mortgage rates predictions can always be proved wrong. What is fueling the current surge in these rates?
The current best mortgage rates across the world are still low. It would be nice to know that they are going lower! However, we must understand that it is very difficult to predict where these rates will go in a few years.
Many economists actually concur that we may see higher mortgage rates forecast very soon! These may be the result of a number of factors including:
The only factor that can pull the rates down would be an uncharacteristic veering towards frugality!
Mortgage rates predictions project what many in the US hope is a slow and steady recovery from the credit crisis and financial meltdown of banking institutions.
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