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Mortgage rates continue slide before start of homebuying season

Over the last year or more, most experts have predicted that mortgage rates would rise at some point in the relatively near future. However, for a number of different reasons, that has not come to pass. And now, with mortgage rates starting to trend back downward, rates are beginning to create a situation that becomes even more difficult to predict going forward. In the meantime, though, consumers who are thinking about getting into the market in the coming busy homebuying season will be able to lock in near-historic savings.

In recent weeks, mortgage rates have been more likely to move down than up, which is confounding industry insiders. First, average rates on mortgages of all varieties were expected to start moving back toward pre-recession norms – somewhere in the 5.5 percent to 6 percent range – around the start of autumn last year. When that didn't happen, the predictions shifted to late autumn or even early winter. And when that also didn't happen, it was thought that rates would surely begin their ascent in earnest by mid-2016 or perhaps slightly beyond.

What happened instead?
But the latest data shows that mortgage rates continue to hover in the mid-3 percent range. Consequently, it's now difficult to reasonably predict that rates could even surpass, say, 4.5 percent by the end of the year. Simply put, rates tend not to jump up by nearly a full percentage point in the course of six or seven months, and at this point, that's what they would have to do to reach that level before the end of the year.

Consequently, it's becoming increasingly likely that many Americans who are in a position to buy at this point will be able to lock in almost historically good deals in a lot of cases. This is because many housing markets have yet to reach pre-recession norms for property values, and combining that with rates that are likewise some of the lowest seen in recent years could add up to savings in the tens of thousands of dollars.

A word of caution
That's a great piece of news for some would-be homebuyers who are now looking to get into the market. But others who aren't as prepared as some lenders like will probably take a bit of a hit. This is because financial institutions are still keeping mortgage credit access extremely tight, and many are only expected to loosen them when refinance activity tapers off a bit. But as long as rates remain low, refinances should continue apace for some time to come.

In the meantime, then, it might be wise for those with somewhat diminished credit to work toward an improved FICO score by keeping up with their monthly bills and reducing their outstanding credit card debt. Doing so can significantly boost their scores in a matter of months and, in turn, will increase their likelihood of getting approved.

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