Bozeman Montana Real Estate Information Archive


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Federal Reserve Raises Short Term Interest Rate

by Hart Real Estate Solutions

By unanimous vote, the Federal Reserve agreed to raise the federal fund rate (aka short-term interest rate) showing their confidence in an improving United States Economy. The Fed will raise their rates from near zero to 0.25 to 0.5 percent, a decision that had been expected to come at several different points in 2015. The Fed will shift between 0.25 and 0.5 based on market conditions. They are also willing to adjust their strategy based on how the economy performs in response to the move.

The Fed has kept rates at near zero since 2008. During the recession, the Fed did all they could to entice borrowers back into the fold. Now that the labor market and housing market have started performing well, the Fed has decided that now is the time to get rates up again. So far, the market has performed well in response to the news, with the Dow Jones Industrial Average rising by 224.18 points.

The Fed pointed to strong dollar values and a rebounding labor market as the major factors that convinced them to raise rates. As the dollar value has risen, emerging market companies that borrowed heavily during low rate periods will now have to pay more to payoff the debt.

But how will the rates affect the housing market?

With a rise in interest rates, each subsequent lender will need to raise their rates as well to keep their business profitable. It is fully expected that mortgage rates will increase over 2016. Mortgage rates have been at historically low levels during the recession. Buyer confidence has improved over 2015, allowing the Fed to raise rates without losing all their borrowers.

Although mortgage rates will in all likelihood increase, according to the National Association of Realtors Chief Economist Lawrence Yun,  the small uptick should not have a major affect on borrowers. However, other experts believe this is the first of several upticks, in which case mortgage rates may rise at several points over 2016.

Currently the 30 year fixed rate mortgage sits at 3.93 percent. In the short term, the housing market might actually have a small surge, as fence sitting buyers take the plunge with rising mortgage rates on the horizon.






Both mortgage rates and loan applications have seen big up and down swings over the first few weeks of July.

Earlier in the month, mortgage interest rates fell and continued to be on a downward trend. On July 10th, the rates fell to 4.04 percent. However, the past weeks since then have given a sense that mortgage rates may once again be trending up. This week, mortgage rates hit their highest level since October of 2014—hitting 4.09% this week. For now, its clear that at the very least, mortgage rates have been volatile and should be watched closely over the follow weeks to get a better sense of where they may be heading.

According to the sources listed below, events and turmoil in both China and Greece directly affected yields on US Treasury Securities. Rates rose during this time, but the Fed may still hold back from raising interest rates in light of turmoil abroad.

Mortgage applications have also been volatile as buyers have mirrored interest rates closesly. In a July 8th article, mortgage applications had risen 4.6% on a seasonally adjusted basis but by July 10th, those numbers had already fallen by 1.9% again. On the bright side, although the numbers may be volatile in 2015, total mortgage volume still remains 22% higher than a year ago and total home purchase volume is up by 17 percent.

Any buyer looking at homes right now will want to keep a good watch over mortgage rates so s/he can take advantage of the lowest available rates. They seem to be moving up and down quickly—so buyers will want to make sure they don’t settle for a loan with higher rates than average.






7.4 Million Owners Could Benefit from Refinancing

by Tim Hart

As the interest rate has dropped for a 30 year fixed rate mortgage in the last few months, a large amount of homeowners have missed opportunities to refinance, losing them big savings on their purchased real estate. According to Black Knight Financial Services, approximately 6 million borrowers met broad-based refinancibility criteria. Black Knight chose their criteria based on the good loan to value ratio, good credit, non-delinquent loan status, and the current interest rates being given to current mortgage payers. However, as rates have continued to drop, the number of people who would benefit from refinancing increased to 7.4 million. Black Knight believes that even this estimate is conservative and the true figure could even be 1.7 million borrowers higher.

In another study done by the National Buereau of Economic Research, up to 20 percent of Americans failed to refinance loans that would have saved them $45,000 over their entire loan’s lifetime. Now interest rates have fallen since that study took place, possibly raising the potential savings even higher.

Homeowner equity has continued to improve across the states. For 28 months in a row, the value of residential real estate has increased, helping lower borrowers with negative equity to below 8 percent. That number has not been that low since 2007. Black Knight had that number at 33% in 2011.

With these conditions in mind, now may be a great opportunity to refinance a loan and take advantage of these low interest rates.


Displaying blog entries 1-3 of 3