Mortgage Rates Possibly Predicting Foreclosures

For the 2^nd week in a row, mortgage rates slightly eased off after the biggest jump in 4 years that occurred 2 weeks ago, according to Freddie Mac. The loan buyer who is government sponsored said that the median rate on a 30 year loan with a fixed rate fell to 6.67% for the week of June 28. The rate was 6.69% the week before. At this time last year the rates averaged 6.78%. We saw further effects of the housing recession this week, according to Freddie Mac Vice President and Chief Economist Frank Nothaft. According to his records, existing home sales in May fell .3 %-the slowest pace since June of 2003, and the length of time that houses were on the market rose to 8.9 (average of months), which was the longest since June 1992. Homeowners that are unable to afford their payments, and are unable to sell their homes could face foreclosures. Increasing rates, as well as other factors, have encouraged groups such as the Mortgage Bankers Association (MBA) and the National Association of Realtors (NAR) to change their forecast for a recovery of home prices. Both the MBA and the NAR are looking to early to mid 2008 for the recovery of existing home sales. Earlier this year, both groups were predicting a recovery in mid 2007. The chief economist for the MBA, Doug Duncan, stated that he believes mortgage rates will top out close to 7% before the end of 2007. If interest rates do rise, potential home buyers could face higher mortgage payments, possibly preventing them from buying a house, and current home buyers could lose their homes to foreclosures if they are unable to afford to new, higher payments.