Orlando Real Estate News

According to Bankrate.com, the benchmark mortgage rate fell by 5 basis points to 5.92 percent. A year ago the rate was 6 percent but it had increased during 2008. Only four weeks ago, the rate was 6.44 percent. Interest rate drops for six straight weeks have given home buyers a reason to jump into the market, and homeowners clamoring for lower rates caused refi applications to triple last week.

What does that mean to a home buyer in the Orlando area? Using a loan amount of $165,000 and the current rate of 5.97, the monthly payment on a 30-year fixed mortgage would be $980.70. That's down over $5 from last week. With a majority of homes in the Orlando, Florida, area selling around the $200,000 range, a monthly payment below a thousand dollars indicates how affordable home ownership is in Central Florida right now.

Other home loan rates were also affected. The 15-year fixed rate fell, dropping 8 basis points to 5.57, and the 5/1 adjustable rate, which has increased last week, dropped 13 basis points to 6.14 percent. (A basis point is one-hundreth of a percentage point.)

When the Federal Reserve announced Dec. 2 that it planned to encourage lower home loan rates by buying mortgage-backed securities amounting to half-a-trillion dollars, lenders responded immediately with a rate drop to 5.25 percent. Unfortunately, that sharp reduction was short term with rates yo-yoing the next day but leveling off at a still attractive rate below 6 percent.

The Mortgage Bankers Association said about seven in 10 applications last week were for refinances. The other three applications were for home buyers--probably taking advantage of lower rates and more affordable housing prices. The chief economist for Quicken Loans, Bob Walters, says, "As long as rates remain at these unprecended lows, we're likely to see this activity sustained for the remainder of the holiday season."

Will the Lower Rates Last?

Most experts and analysts providing predictions for Bankrate.com's Mortgage Rate Trend Index believe rates will stabalize near today's rate or drop even lower. Dick Lepre of Residential Pacific Mortgage expects the Federal Reserve to drive rates lower, perhaps even below 5 percent, while Jim Sahnger or Palm Beach Financial Network advises borrowers to find a rate that works for you and lock it in! Bankrate.com analysts believe rates will fall again as the Fed's money works its way into the mortgage securities market.

No one can predict exactly what mortgage rates will do. It's a turbulent time and credit availability and falling asset values have contributed to the economic slowdown. The Federal Reserve hasn't begun buying mortgage-backed securities yet, but just the news of their plan inspired the recent rate reduction. Fed Chairman Ben Bernanke said in his speech Monday that his hope is that lower rates will stimulate home sales. Since shopping for and purchasing a home can take weeks, it will take a sustained reduction in interest rates over time to prove the effectiveness of this lrate reduction program. The report issued by the Fed said it wanted to push mortgage rates down and keep them down so people will buy houses. The initial reaction from lenders and subsequent bump in mortgage applications could be the positive response the Fed is hoping for if the trend continues.

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