MORTGAGE RATES » Home Mortgage Loan News

As its name implies, a fixed rate mortgage (FRM) is a home loan where the interest rate remains fixed for the entire term of the loan. Whereas the interest rate on other types of loans, such as an adjustable rate mortgage, graduated payment mortgage, negative amortization mortgage, or balloon payment mortgage may adjust or float, even if they have a fixed period with an introductory rate, the interest rate on a fixed rate mortgage always remains the same.

The fixed-rate mortgage is the traditional form of home financing in the United States, and the one most often used for a home purchase. Common terms for a fixed rate mortgage are 15 year or 30 year mortgages, but shorter or longer terms are available. You can even get up to a 50 year mortgage, in some areas with high priced housing.

Outside of the US, fixed rate mortgages are less common and in some countries, a fixed rate home loan is unavailable, except for a very short-term loan. For example, Canadian mortgage rates typically can be fixed for no more than 10 years, while the maturity on these loans is usually 25 years.

Pricing on Fixed Rate Mortgage Products

Typically, a fixed rate mortgage is more expensive than an adjustable mortgage, both in terms of its interest rate and in the long term. Fixing a rate over the long term is considered a risk to the lender, so they tend to set these loans at a higher interest rate to compensate for rising market interest. The difference between the interest rates for short and long-term loans is called the yield curve. Longer term loans are more expensive, as you pay more interest over the life of the loan.

However, the higher starting interest rate on a fixed-rate loan does not necessarily mean that an adjustable rate mortgage is a better form of financing. If interest rates go up, the rate on the adjustable rate mortgage (ARM) will go higher as well, while the FRM will remain stable. Borrowers who went with an adjustable rate mortgage to save money may find themselves paying far more out of pocket when the adjustment takes effect. You will need to take a look at the loan term, how long you plan to stay in the house, the current interest rate, and how likely you are to refinance later on, to determine which option is right for you.

Despite leading indicators showing some improvement as signified by a rise in home sales and stock prices, experts agree that the economy isnt necessarily making a turn for the better. Many analysts believe that we have a long way to go before we can see significant improvement.

So if the economy as a whole is still suffering, why are we seeing small changes with the leading indicators? Here are a few reasons:

• Home prices have plummeted. According to the National Association of Realtors, existing home sales rose 6.5 percent in December. However, the celebration is only short-lived with the realization that the increase comes from the biggest slump in prices since the Great Depression due to record-breaking foreclosures.
• Potential company buyouts increase hope in stocks. When people hear of the possibility of companies merging, hope in the financial markets is often revived, resulting in stocks advancing. Weve seen evidence of this as some major pharmaceutical entities have recently spoken of prospective acquisitions, causing stocks in the sector to rise.
• The financial bailout is doing its job. Since the money supply has increased thanks to the Fed purchasing securities and lending more to banks, the leading indicators index increased at a time when it otherwise would have suffered.

The moral of the story is, while leading indicators may show some minor improvements, they are still associated with more significant issues that negatively affect the economy. Sothough it may appear that hope is on the horizon, its good to keep the big picture in mind, reviving an economy takes time; and in the case of the current recession, it could take years. The rise in home sales should not be taken as any indicator of a market bottom. It is also a good idea to continue monitoring mortgage rates and other housing-related news here for updates on the continually changing state of the U.S. housing market.

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As you might deduce from the name, fixed rate mortgages are loans in which the interest rate is set at the same rate for the full 30 year term of the loan. Among the most popular fixed rate mortgages is the 30 year fixed rate mortgage, which accounts for a large percentage of all home loan...

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A fixed rate mortgage is a loan in which the interest rate remains the same during the entire life of the mortgage. Some other types of loans, such as an adjustable rate mortgage, graduated payment mortgage, negative amortization mortgage, or balloon payment mortgage may include a fixed rate...

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