Throughout the last year, mortgage rates largely hovered at or near all-time lows, but consumers often failed to take advantage of these available deals. Fortunately for prospective home buyers, the historic low rates are expected to continue throughout 2012 as well.
Last year, mortgage lending hit $1.3 trillion, but that was down from $1.7 trillion in 2010 and the pre-recession high of $3.3 trillion in 2005,according to a report from the Los Angeles Times. And despite the plunging numbers, the 2011 total was actually somewhat higher than experts originally guessed, due in part to the historic low interest rates which hovered around 4 percent for much of the year. That prompted many homeowners to refinance their existing mortgages.
In the coming year, however, it’s believed that the slowly recovering economy and continued low rates will prompt more Americans to look into buying homes of their own, the report said. In addition, home prices are expected to continue to slip throughout 2012.
“I think there may be a little bit of an uptick in units sold,” Doug Duncan, vice president and chief economist at mortgage finance giant Fannie Mae, told the newspaper. “But home prices will probably be down again, so the total dollars spent on purchases is likely to be pretty close [to 2011].”
However, experts also say that some of the problems related to the slow housing market are the result of consumers who are unable to refinance due to poor credit, low equity and the stagnant job market, the report said.
Nonetheless, by the end of last year, refinances accounted for more than 80 percent of all applications received by lenders, up considerably from Freddie Mac’s estimated 67 percent or so, the report said. But that’s because interest rates have plunged so sharply in the last year that those who bought homes in the 1980s and 1990s were likely paying far higher rates from when they first signed their mortgage agreements. As recently as 2000, the average interest rate on a 30-year mortgage was more than 8 percent. The average in 2011 was 4.45 percent.
Many consumers may also be taking advantage of the large number of foreclosures still on the housing market, combining the cut-rate prices these properties provide with the savings that come with historic low interest rates.