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Current Mortgage Rates Remain Low, Loan Limits May Be Raised

The current economic turmoil in the European Union member nations of Greece and Italy is helping mortgage applicants in the United States by keeping rates at historical lows. While the American economy is still in the doldrums for all practical reasons, recent signs of recovery have been spotted. These are the famous “green shoots” mentioned by the Chairman of the Federal Reserve Bank more than two years ago. These little spikes of recovery aren’t expected to push rates higher.

Current mortgage rates are slightly lower than last week, but just by a few basis points. The average annual percentage rate (APR) on the benchmark 30-year fixed rate conforming home loans is at 4.22 percent, according to the Weekly Survey published by the Mortgage Bankers Association (MBA). The 15-year fixed rate mortgage averaged 3.54 percent. Adjustable rate mortgage (ARM) products also registered a slight decrease; the new average APR is around 3.01 percent. The effective rate of origination fees on all conforming home loans has also decreased.

Americans are now enjoying some of the best home mortgage rates in years, although the lending requirements are still pretty strict due to the generally tight underwriting guidelines. The current mortgage rates have motivated thousands of homeowners to submit refinance applications. According to the MBA’s survey, the overall application increased by a little more than 10 percent since last week. Almost 80 percent of the applications submitted by borrowers were for refinancing. The index of purchase applications is now at the highest level of the year.

One of the most pressing issues in the mortgage lending industry continues to be the loan limits for conforming mortgages, particularly in high-cost areas of the United States. Congress is set to vote on an item that will increase the current limit on the loan amounts of loans that can be approved, guaranteed and purchased by government agencies such as the Federal Housing Administration (FHA), Fannie Mae and Freddie Mac.

The best home mortgage rates are reserved for loans that can be guaranteed by the government; these are known as conforming products. Until October 1 of this year, the limit on conforming loans was $729,750 on expensive housing markets such as Hawaii. That limit was dropped to $625,500 as a risk-mitigation strategy, but real estate analysts have complained to lawmakers that such restrictions end up curbing housing activity. The Congressional vote on increasing the loan limits is expected to be very close.