Bad Credit Mortgage Refinance
Interest rates have a high bearing on home mortgage loan defaults as well as on bad credit mortgage refinance. Between June 2004 and June 2006, the central bank of the United States, the Federal Reserve, hiked interest rates by quarter of a percentage point every time in its 17 meetings in that period. As such, interest rates have climbed from a low of 1% prior to June 2004 to 5.25% at present. However, economists widely believe that the Fed is most likely to keep the interest rates at 5.25% throughout 2007. According to them, a cut in the interest rate is more likely in the latter half of 2007, as opposed to any further increases. An analysis of the impact of this increase in interest rates would throw sufficient light on home mortgage loan markets and bad credit mortgage refinance.
The unemployment rate was standing at 4.5% in December 2006 in the United States. Economists forecast the jobless rate to remain at the same level in January 2007 and opine that there is not much likelihood of the unemployment rate inching much further higher. This would abate concerns to some extent of higher inflation in 2007. On the other hand, the substantially high level of jobless rates, coupled with comparatively high interest rates, would tend to enhance the chances of more defaults of home mortgage loans in the United States.
In 2006, new home sales plummeted 17.3%, the largest fall in 16 years. New home sales during December 2006 were 1.06 million, compared to a record 1.28 million in December 2005. However, in December 2006, completed houses available for sale climbed to a record 172,000, a rise of nearly 50% from the year-ago period. With the demand receding and supply increasing, the housing market is likely to be in a lull for some more time. As such, housing loan defaults would definitely go up from the more than one million homes that are under foreclosure status on any given day at present.
Hence, the present scenario offers a very good opportunity for bad credit mortgage refinance. Persons would have gone in for mortgage loans carrying interest rates proportional to the Fed interest rate of 1% prior to June 2004. Those who had opted for variable interest rates would find the current Fed rate of 5.25% reflected in their present interest rates. The amount of monthly installments would rise sharply, forcing many to default on their mortgage loans. They would have no other recourse but to opt for bad credit mortgage refinance. Given the current position, foreclosure investment professionals, financial institutions, and other real estate agents that are in the business of bad credit mortgage refinancing are very likely to seize the opportunity with both hands. The costs of bad credit mortgage refinancing would remain quite high, spelling further doom for the already troubled owners of distressed properties.