SACRAMENTO -- Resurgence of Fixed Rate Loans as Solution for Homeowners Seeking to Escape Interest-Only or Adjustable Rate Mortgages

High Housing Prices Continue to Force New Buyers to Alternative Loans
The California Association of Mortgage Brokers (CAMB) today issued its annual Mortgage Forecast projecting that interest rates will remain favorable in 2007 with the rates likely to remain within one percent (1%) of current low levels. Additionally, recent homebuyers (within the last several years) who used an interest-only or adjustable rate mortgage are turning to fixed rate loans as they refinance and take advantage of equity. However, despite the recent stabilization of the housing market, many new buyers are still forced into alternative loan products due to high housing prices. Finally, for home shoppers, the first half of 2007 is likely to be the best time to get a good deal on a new or existing home.

“Interest rates will remain extremely favorable to borrowers in 2007,” said Jack Williams, president of the California Association of Mortgage Brokers. “Fixed rate loans are making a comeback for those who are refinancing while alternative loan products are likely to remain popular because of high housing costs. It is important for consumers to make sure they understand how the various loan programs work to ensure that the loan program they select meets their financial objective or fits their own unique needs.”

Four hundred members took part in CAMB’s fifth annual survey during the months of October and November of 2006. Survey highlights include the following:

• Thirty-six (36) percent of members believe that interest rates will rise by less than one percent while 29 percent believe they will stay the same. Others (26 percent) felt rates will decrease by less than one point, while another 7 percent felt rates will rise by more than one point, and 2 percent felt rates would decrease by more than one point.
  
• Thirty-eight (38) percent of members believe that home prices will decrease slightly (less than five percent), while 26 percent believe there will be a slight increase (up to five percent). Other projections included a significant decrease (19 percent), no change (12 percent), a significant increase (2 percent), or other options (3 percent).
  
• Twenty-nine (29) percent of members believe that the prime fixed rate loan will be the most popular in 2007, primarily due to refinancing by recent buyers who are seeking to capitalize on recent appreciation and escape alternative loans. Other popular loans included the interest-only loan (25 percent), prime adjustable loan (23 percent), the hybrid adjustable (15 percent), and the non prime loan (8 percent).

• However, 36 percent of those surveyed feel that the interest-only loan will be the most viable product for consumers due to the continuation of high housing costs in the state. According to the forecast, other viable mortgage products will include hybrid ARMs (21 percent), traditional fixed rate loans (20 percent), option ARMs (5 percent) and the extended fixed rate mortgages (18 percent), which include the 40-year and 50-year loan.
  
• Thirty-five (35) percent of those surveyed believe that January through March will be the best time of the year to purchase a home, while 31 percent project that April through June will be the best time. 17 percent felt July through September is a good time while another 17 percent believe that October through December is better.
  

“The first six months of 2007 will probably be the ideal time for consumers to purchase a home,” said Williams. “During that period, there will be fewer buyers, more housing inventory, low interest rates, and more motivated sellers. It is important for consumers to be aware of these factors, and to be sure they are working with a qualified broker who will be putting them in the best loan to fit their circumstances.”

Consumers with mortgage questions are encouraged to contact CAMB’s toll-free consumer information hotline at 1-800-253-2262 to be connected with a local member or visit the Web site at cambweb.org.

The California Association of Mortgage Brokers is a non-profit organization representing more than 4,500 industry professionals throughout California. CAMB provides ongoing education to industry members, maintains industry standards, and supports efforts to increase consumer understanding of mortgage broker services. Additional CAMB information can be accessed via the Internet at www.cambweb.org.