Mortgage rates

The G8 (Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States) leaders gathered to the Italian city L’Aquila from 8 to 10 to discuss issues of global importance. The main issues on the Italian Presidency’s agenda were the economic crisis and a boost to growth, re-launching international trade, welfare policies, climate changes, development in the poor countries and in Africa, food security and safety, access to water, health, and the resolution of regional crises.

The second day G8 met G5 (Brazil, People’s Republic of China, India, Mexico and South Africa) and Egypt to discuss global issues and policies for development in the poorer countries. In G8 + G5 format with the addition of the IEA (International Energy Agency), World Bank, IMF (International Monetary Fund), ILO (International Labour Office), OECD (Organization for Economic Co-Operation and Development), WTO (World Trade Organization) and UN (The United Nations), the discussions were devoted to the future sources of global economic growth.

The last working day for the 2009 Summit G8 met Algeria, Angola, Egypt, Ethiopia, Libya, Nigeria, Senegal, South Africa + the African Union Commission, with the addition of the IEA, World Bank, IMF, ILO, OECD, WTO and UN. The topic for discussion was the impact of the crisis on Africa.

The final working session was devoted to the issue of food safety and security; it will be attended by all of the Summit’s participants.

World leaders said they will give $20bn over three years for a “food security initiative” to develop agriculture in poor countries. However aid agencies responded with scepticism, pointing to a chain of broken promises and a habit of switching around existing budgets.

How much of the promised money was new or how it would be managed remained unstated. Even the African leaders present were left in the dark.

Born out of the surge in global food prices last year and the financial crisis hitting budgets of developing countries, a new initiative is focused on helping smallholder farmers over the long term. But it promised not to take resources from emergency relief. However in 80 per cent of countries food is more expensive than a year ago. From 1969 to 2004 the proportion of the world’s population suffering from hunger dropped from 30 per cent to 17 per cent. Now it is on the rise again.

The UN Food and Agriculture Organisation, which has been involved in the talks, is urging action. Its Director-General Jacques Diouf said: “We need to double world food production by the year of 2050 to feed a population that is expected to reach nine billion persons.”

Another issue was the reduction of pollution until 2050 by 80% as it was agreed by G8. They also agreed to work with other nations to cut overall global emissions in half. This ambitious effort is consistent with limiting global warming to no more than two degrees Celsius.

Group of Eight leading nations’ foreign ministers strongly condemned North Korea for its nuclear test and long-range rocket launch, saying in a draft statement that the actions threatened regional peace.

“We condemn in the strongest terms the nuclear test conducted on May 25 in violation of U.N. Security Council resolution 1718 and the rocket launch of April 5 which constitute a threat to regional peace and stability,” said the draft statement obtained by AFP.

Let’s clarify a little bit the subject of this site.

A mortgage is the transfer of an interest in property (or the equivalent in law - a charge) to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender’s security for a debt. It is a transfer of an interest in land (or the equivalent) from the owner to the mortgage lender, on the condition that this interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower.

This comes from the Old French “dead pledge,” apparently meaning that the pledge ends (dies) either when the obligation is fulfilled or the property is taken through foreclosure.

(Wikipedia)

In the beginning, a mortgage was just a conveyance of land for a fee. The buyer paid the seller a set rate, with no interest, and the seller would sign over the land to the buyer. There were usually conditions that had to be met before the land would be the property of the buyer, just like today, but usually it was based upon the assumption that the land would produce the money to pay back the seller. So, a mortgage was written due to this fact, and the mortgage stayed in effect no matter if the land produced or not.

But this old arrangement was very lopsided in that the seller of the property, or the lender who was holding the deed to the land, had absolute power over it and could do whatever they liked, which included selling it, not allowing payment, refusing payoff, and other issues which caused major problems for the buyer, who held no ground at all. With time, and blatant abuse of the mortgage system, the courts began to uphold more of the buyer’s rights so that they had more to stand on when it came to owning their land. Eventually, they were allowed to demand the deed be free and clear upon the payoff of the property. There were still steps taken to ensure that the seller still had enough rights to keep their interest safe and make sure that their money was paid.

In the U.S., some states have created their own version of the mortgage, which is why they are referred to as “lien states”. In England and Wales, the Law of Property Act of 1925 created a close parallel to the U.S.’s stance on mortgages. In 1934, mortgages began to be widely used again in the U.S., and the Federal Housing Administration helped to lower the down payments on homes to make it easier for buyers to purchase a home. During that time, around 40% of people in the United Sates owned homes. Now, that number is closer to 70%.

Although mortgages today have evolved into many different forms, they are still basically the same essential contract that they were in the beginning. Now, there are many more laws and regulations to help protect the buyer, seller, and creditor. There are also many different ways to lock in a low interest rate, you just need to talk to your mortgage broker about what the rates are now and what kinds of programs they offer to keep those interest rates low throughout the life of your loan.

(A short history of mortgage).

Now let’s look at the mortgage rates over the time so we can have a clearer view of them now during this crisis.

This is the average contract rate on commitments for Fixed-Rate First Mortgages (FRM) and AdjustableRate First Mortgages (ARM). Historically speaking, the rates are still low, even though they increased lately.

There are certain states in Europe that try to solve the lack of places to live problem. This is the case especially for young people who can hardly afford to buy such a place. So now during the crisis, when prices are lower but at the same time people are not as wealthy as before, the government offers special conditions for buying your first place to live. Through an agreement with some of the banks the government establishes the maximum interest rate (floating rate linked to Euribor) and other conditions such as the minimum sum of money that one person has to have in order to be able to enter this program, the maximum repayment term. So the individual which is a citizen of the country in question buys his first place to live and has a mortgage to pay back, quite a convenient one I would say. He is not allowed to sell the house during the first couple of years. The government offers the banks a state guarantee that in the case the individual will not pay back the loan, the state will refund the banks, and will take all the bother to execute the mortgage

In this way the government tries to solve this problem with places to live and at the same time to boost the baking system and the activity of housing developers.

Hopefully this will happen, but at the same time maybe the prices of houses will stop falling. There is a risk that the individuals will not manage to pay back the loan which will lead to the government debt getting higher. This in its turn will lead to higher taxes to cover the debt. So it is kind of tricky the whole thing… Take the example of Romania: there has been a lot of debate around this subject if it is a good idea to go forward with this program or not and finally there has been voted a government disposition to begin the programme.

If there is any good time to buy a house I would say: buy it now! The prices are lower and there are such programs that help one have convenient conditions for mortgages.

Lucia