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Mortgage Rates Still Too High For Most Americans

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While many Americans have taken the time to refinance their home loans to take advantage of the low rates currently available, the vast majority of homeowners are still paying interest rates that are much larger.

Though mortgage rates on 30-year fixed-rate loans have hovered at or near all time lows more or less all year, most Americans with a mortgage are still paying well above that rate, according to data gathered by the real estate firm CoreLogic for the Los Angeles Times. In all, 69 percent of U.S. homeowners had interest rates of 5 percent or more through the end of the second quarter. Further, 33 percent of consumers have rates of more than 6 percent.

This is a major issue for many homeowners, who may be paying more than they need to for their monthly mortgage payments, the report said. Further, 84 percent of homeowners whose mortgages are underwater — that is, they owe more on them than their homes are worth — have interest rates of more than 5 percent. Half have rates that come in at more than 6 percent. Despite this fact, nearly 85 percent of underwater homeowners were still current on their mortgages at the end of the second quarter.

“The constraint that is keeping people out of the housing market is absence of equity,” Richard Green, director of the Lusk Center for Real Estate at the University of Southern California, told the newspaper. “The drop in house prices means that many borrowers are underwater on their houses, and high unemployment has prevented potential first-time buyers from accumulating down payments.”

However, the interest rates on both 30- and 15-year fixed rate loans are pushing housing affordability to at or near all-time highs, the report said. Those for 30-year loans, largely favored by buyers, rather than current homeowners, have been below 4 percent for all but one week so far this year. Meanwhile, 15-year fixed mortgages — which refinancers seem to prefer — have seen rates hover below 3 percent since the end of May.

Meanwhile, though underwater homes are still a major problem nationwide, housing values are on the rise in many parts of the country, and that could entice more current homeowners whose homes were once underwater to begin the process of putting their properties on the market.

Image: 401(K) 2012, via Flickr

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