Mortgage Rate News

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Mortgage lenders are having a tough time of it right now. Concerns about the housing market are still in effect. Even though November showed an increase in housing starts, and there has been an extension and expansion of the home buyer tax credit, there are still worries about the housing market. Additionally, there has been a reduced demand for loans of all kinds as consumers work to modify their spending habits, and that has many mortgage lenders scrambling for a little more income. And, of course, some are worried about the prospect of tighter regulation as consumer protection legislation inches closer to law. All of this is combining to make a difficult environment for mortgage lenders.

Another problem is general confidence in the financial sector. Mortgage lenders are reaping the results of recent credit debacles. The recent problems in Dubai, along with the even more recent news about a possible banking crisis in Austria — and possibly spreading to more banks in the euro zone, are all combining to encourage investors to take a cautious view of the financial sector. And that means that raising capital continues to be difficult. Indeed, even with banks announcing that they will be repaying TARP, investors and others remain skeptical of the solvency of banks.

It will be interesting to see how things proceed from here. Mortgage lenders need to attract more borrowers, but, still stinging from the subprime mortgage disaster, they have tightened standards to a point that it is difficult to find qualified borrowers. While it would be foolhardy for mortgage lenders to go back to approving anyone with a pulse, they might have gone too far the other direction with their restrictions. This is especially true when it comes to refinancing. Letting a higher number of people in on the best rates for refinancing by perhaps lowering the threshold from something around 720 to something closer to 690 might help encourage more refinancing applications.