More time for low rates?

After waffling on how long low mortgage rates are expected to stick around, some analysts have called for rates to not rise significantly through next year.

Honestly, that’s about as specific as anyone wants to get these days as one never quite knows what to expect in the global economy. It seems that markets are very tightly connected, so trying to guess what’s going to impact what can be a chore.

Here’s an example. The last time the average rate on a 30-year, fixed interest mortgage was above 6% was November 2008. Rates have fallen steadily since then due, in part, to the credit crisis in Europe – investors pulled their money out of risky, European markets and bought safer instruments such as U.S. Treasury bonds.

A safer investment is less risky, meaning interest rates on those bonds fell. Mortgage rates are tied closely to those long-term bonds, meaning that interest rates on home loans fell. How far did they fall? The record low rate was set during the week of July 26 at 3.49% on a 30-year mortgage.

At the end of August, rates averaged 3.59% at the end of August after rising a bit due to an expected improvement in European credit markets.

See? Confusing.

Here’s the point, however. Freddie Mac officials expect rates to stay around current levels for some time and perhaps through 2013. Freddie Mac is the government sponsored entity that – along with Fannie Mae – backs most mortgages in the nation.

That’s good news for people looking to purchase homes and perhaps better news for people in a position to refinance their mortgages at lower rates. The Los Angeles Times reported that two-thirds of the nation’s homeowners are paying on mortgages with interest rates of 5% or more.

The opportunity for those homeowners to refinance at lower rates and save some money may continue. That means both people wanting to refinance mortgages or take out existing ones may have more time to save money, get their credit reports in order and take other steps to qualify for home loans with low interest rates.

Of course, rates could go up again, but at least the folks over at Freddie Mac are expecting them to remain low.

One problem with refinancing has to do with borrowers who owe more than their homes are worth. That has been an obstacle for the programs put in place by the federal government in hopes of helping people who are struggling with their mortgages.

Rising home values and more aggressive federal programs have helped some of those underwater buyers and may continue to do so. If you’re interested in finding out if refinancing is an option for you, give your local mortgage banker a call. That professional can discuss your options with you and may have some advice on what to do to become eligible for a mortgage.

There may be some more time to take advantage of lower interest rates, so use it wisely.