Will Home Owners Start Refinancing?

Since October of 2008 mortgage rates have steadily dropped to historical lows.  One of the main reasons rates have dropped is because of the influence of the Federal Reserve Bank.  The Fed Chairman, Ben Bernanke, believes one of the ways to get out of this recession is to let housing pull us out of it.  The only way to get individuals interested in the housing market again is to give them extremely low interest loans to buy a home.

If interest rates on mortgages are lower than most car loans, it makes sense that Americans would be interested in getting a first mortgage or refinancing their current one.  The only problem to this equation is that home prices continue to fall to prices we haven't seen in almost a decade.  A first time home buyer is afraid to sink a great amount of capital into a home that could very well decline 20% in price within a few months of the purchase.

Those who desire to refinance are having issues with the value of their home.  If the appraised value is coming in much lower than they expected, they may not have the loan-to-value (LTV) needed to get the low mortgage rate they are seeing advertised everywhere.  The rules have been bent a little bit to help this situation but there are still many home owners out there who have seen 30% to 40% declines in their home values and they do not have the capital in the home to get the refinance rate that they desire.