VA Home Loan mortgage rates defy expectations

VA Home Loan mortgage rates defy expectations

Borrowing levels are lower than one year ago, and dropping

It’s a Great Time to get a VA Home Loan

By John P. Allen

Mortgage rates were supposed to be rising by now, helping to gradually cool the nation’s red-hot housing market.

The Federal Reserve has been raising short-term interest rates steadily for nearly a year. The economy is growing at a healthy pace. Energy costs are up. If history were a guide, long-term rates would be rising, too.

But they are not. Even Fed Chairman Alan Greenspan has called this a “conundrum.”

Defying predictions, U.S. mortgage rates are lower than they were a year ago and are falling. That’s a large part of why home sales and prices are at record highs and are fanning worries of a real estate investment bubble.

The rate on the average 30-year fixed-rate mortgage fell to 5.65 percent in the week that ended May 26, the lowest rate since mid-February and below the 6.32 percent level of a year ago, according to mortgage financier Freddie Mac.

“The housing market is going to be robust if rates stay where the are,” said Freddie Mac’s chief economist, Frank Nothaft. “But it’s hard for me to fathom why they would stay this low for long.”

gm@veteranstoday.com