The 30 year fixed mortgage is unique to the US where the mortgage interest rate is fixed for 30 years. For the mortgage borrower, this is great because the carrying cost of financing a property here in the US is fixed. While over time, the property price and rental income increases. In most other countries, the mortgage loan rate is variable, which means it fluctuates with the overall interest rate environment.
For example, in the US, a 30 year fixed rate at 4% means that over the life of the mortgage, the rate remains at 4%. While in (for example) Hong Kong, the mortgage may be 3% today but may increase to 5% next year and 10% in 5 years if the interest rate environment increases.
While the 30 year mortgage in the US is now 3.99%, it was 6.5% five years ago and above 8 percent ten years ago.
Refinancings have increased as homeowners take advantage of the low rate. However, US-wide, the low rate did not spur buyers who are still concerned about declining wages and high unemployment.
A prime market like New York has been seeing increased transaction activity from the low rates. Reason is that the drivers for New York - demand from foreign buyers, weak US dollar, highly paid jobs - are very different from rest of the US. In 3Q'11, number of transactions increased 16.7% compared to a year ago. The absorption rate, which measures how many months it takes to sell available inventory, is now at 7.5 months, decreasing 18.5% compared to a year ago.
Wei Min Tan in Managing Director of Castle Avenue Partners, focusing on foreign buyers interested in buying Manhattan, New York property. He has appeared on CNN, New York Times and the Wall Street Journal on the topic of foreign buyers of Manhattan property. Wei Min speaks Cantonese Chinese, Malaysian and conversational Mandarin. He can be reached at tan@castle-avenue.com
1 comment:
Nice post, Always keep in mind that the interest rate can vary though if you have a common credit account. It will also be depend on the mortgage loan term choose by you. You have to choose either a fixed interest rate, or an adjustable interest rate. The fixed rate would do better if you are going to stay in the same home for over 10 years, or more. The adjustable rate mortgage (ARM) would be a better option if you are going to stay in the home for less than 10 years.
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