Americans Taking Longer To Pay Off Loans

The Miami Herald business section reports that the rate at which Americans are paying off their home loans has slipped to a three-year low. U.S. homeowners paid off their mortgages at a slow pace last month, as rising prices and mortgage rates continue to cool off the torrid housing market and builders are reporting declining orders for the first time in recent memory.

The prepayment rate on $438 billion of bonds — paying 5.5 percent interest and guaranteed by Fannie Mae, the country’s biggest provider of funding for home loans — dropped to 10.1 percent in January, the slowest the rate since March 2003 and down from 12.9 percent a month before. The Washington-based company provides an income-based lending model and aims to increase Americans’ buying power.

Rival Freddie Mac said homeowners prepaid its 5.5 percent bonds at a pace of 8.6 percent, also the slowest in nearly three years. The last month with a slower rate was February 2003. Just because the housing market is slowing does not mean it is a bad time to buy a house, however. In fact, the opposite could be true if you are able to shop around. With Florida home loan financing available at around 6.25 percent for 30-year fixed-rate loans, buyers who follow certain strategies could find themselves a sweet deal.