The Fed may have lowered interest rates recently, but that didn’t make mortgages any cheaper, said Stephen Gandel in Time. In fact, the government’s effort to bolster bank lending backfired when 30-year mortgage rates jumped more than half a percentage point to 6.74 percent in a single week—the biggest such spike in 21 years. Mortgage rates initially “fell sharply” after the government took control of mortgage backers Fannie Mae and Freddie Mac in September. But after the government stepped in to shore up banks’ debt, Fannie’s and Freddie’s bonds became “less safe by comparison.” That made it more expensive for the mortgage giants to borrow money—and that’s what caused rates to spike. “Some economists say mortgage rates could soon top 7 percent, a level they have not seen in more than six years.”
The days of easy credit are officially over, said Luke Mullins in U.S. News & World Report. But that doesn’t mean it will be impossible to get a mortgage. Experts say that banks are simply reverting to the prudent lending practices that had been common before the housing boom. In other words, borrowers need to have solid credit histories, proof of income, and at least 3.5 percent saved for a down payment. Don’t forget to shop around with small banks, credit unions, and other local lenders, says Keith Gumbinger, vice president of HSH Associates. Such firms didn’t get caught up in subprime lending and “are in a very good position to make you a loan at a lower markup over their cost of money.”
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