Rates at History Low Since 1951
The interest rates have been slashed again by the Federal Reserve. Now the question is will the banks follow and reduce interest rates for mortgages? This rate reduction is a step forward in the uphill battle to stave off a deep recession. The dramatic rate reduction takes the cost of borrowing at a ALL TIME RECORD LOW since 1951!
And with the economy entering recession the base rate is expected to fall further next month. The cut was widely expected but the bottom line is whether the banks will also pass on the cut. If they do, it will be welcomed by businesses as it will reduce interest payments and if mortgage rates are also reduced, it will give people room to spend more on the higher purchase amount which will assist in making the economy go around. When people spend more money, the economy moves.
The Government must now pull every lever of influence to get banks lending. If that doesn’t work, radical measures will be needed straight away. The alternative is a wave of bankruptcy and redundancy. The battle against deflation is on. Rates are set to fall further, and soon, as policymakers try to counteract the powerful contractionary forces at work in the economy.
However, it is unlikely that low interest rates alone will achieve the desired result and may continue to buy up mortgage and commercial debt, to free up lending and re-liquefy the financial system.
In terms of the property industry the cut was good news in one sense because it means that existing mortgage holders, whether commercial or residential, will be paying less if they are on a tracker or variable rate and this should have a positive impact on margins. However it is critical that the banks start lending again and that is the problem because people cannot get any credit.
Credit is cheaper now as a consequence of the cut in interest rates but the lack of availability of funds is crippling the market at the moment and both confidence and credit need to return for people to buy and invest and for the industry to begin to return to normal.
The concern is that, despite interest rates being at an historic low, lenders are still being ultra- careful and looking at big deposits with high loan to value ratios not exceeding 70%.
Lenders are having to factor in the falling property prices at the moment and provide themselves with sufficient equity to act as a cushion so they don’t get their fingers burnt again.
While this is good news, these interest rate cuts aren’t helping the consumer yet as lenders aren’t passing on the savings and, until they do, we’re all still treading water.
There is a pent up demand of buyers out there who want to get on to the property market but are unable to because lenders have tightened up on their criteria. Until they adopt a more risk-based approach we will still see good lending being turned down.
There is no point in the Government forcing the banks to pass on the savings as they still need to rebuild their profit margins. Once they do this, we will start to see the real benefits of these measures as the banks will then have the confidence to lend to one another again.
This may not happen before Christmas but high hopes are for this to go in effect for the new year!
Loan Modification Program can be an alternative to Short Sale or Foreclosure
The economy and mortgage industry is still far from seeing the light at the end of the tunnel. As far as the value of homes, as people continue to “let their homes go” and walk away from their mortgage, the values continue to drop drastically.
What many people do not understand, is they may be causing another problem instead of resolving the current issue at hand. Many people who are upside down and overwhelmed with their current mortgage payment (due to adjusting ARMs, splitting household financing, lost jobs, or many other situations that affect the monthly income) may have options they are not aware of when it comes to saving their house, reducing monthly mortgage payments, reducing principle balance on current mortgage and preventing short sale or foreclosure.
When a person decides to settle for a short sale or foreclosure, many are not aware of the many consequences that are attached to these. Income taxes may be attached to the difference in balance and amount they walk away from causing a huge amount owed to the IRS at the end of the year. Also, the legal costs associated to either is HUGE for the lender in addition to the cost of losing money on the amount owed that the person never pays. And of course, worse of all, the person loses their home and all the hard work put into making that house into their home. Now that person is out of a home and will not have the option to purchase for a minimum of 4 years. So that individual is now obligated to renting for the next 4 years. These are just a few of the obvious consequences that occur with either a Short Sale or Foreclosure.
There is an alternative option that many are not aware of. When in doubt, contact me or your mortgage provider for further details to understand all your options before causing another HUGE headache and problem. Loan Modification programs are readily available to assist loan modification negotiations with your current mortgage company. These professionals are specifically trained to renegotiate your mortgage payment. With your current financial situation, they are able to leverage your situation and give your current lender the benefits of modifying your loan. What many people do not understand is the lender has a HUGE incentive to keep you as a customer and keep you paying on your mortgage. Many of the customer service representatives at the lenders are trained to turn you down when requesting assistance with modifying your loan. However through a loan modification program, such as the one I have available, they know how to approach the lender.
There are many people who are candidates for a loan modification showing some time of hardship they are experiencing with their finances. Here are a few examples:
- divorce/separation
- medical/death
- income reduction
- Adjusting rate mortgage increasing monthly payment
- Here are a few benenfits of loan modifications which will reduce your monthly payment:
- reduction in interest rate
- conversion from interest only payment to fully amortized (now your mortgage payment will go towards paying a portion of the principle balance down)
- forgiveness of past due amount
- principle reduction
- increase term to 40 or 50 year term
The initial consultation is free. We take your initial application and financial information and have it reviewed by our loan modification company. Once they review this, then they will determine whether or not you are a candidate. At this point, you can decide if you want to move forward with the process which takes 4-6 weeks and it does cost money. This is a money back guarantee program so if they are not successful with renegotiating your mortgage, they will refund the entire amount to you. So, now the question is, are you a candidate and what are you willing to do to save your home for you and your family.
**Please be aware there are many different loan modification programs so be cautious with whom you do business with.