Today's economy is one, which has economists using words such as "perplexing" and "conundrum." Making predictions as to what the economy will do next week is difficult--trying to predict what will happen six months or a year down the road is anyone's guess. But it's a fact that interest rates are at lows not seen since our parents were inking their first mortgages.
A snapshot of the current economic climate shows a steady improvement over the last 18 months. The Federal Reserve has raised the short-term interest rates six times over the last year; yet mortgage rates remain at an all-time low. If you are in the market for a mortgage or desire to refinance your underlying mortgage, now is the time to do so. In June of 2004, a 30-year fixed-rate mortgage carried an average interest rate of 6.3 percent. On June 22, 2005, that same 30-year fixed-rate mortgage can be locked in at an average rate of 5.34 percent, according to www.bankrate.com--making them the lowest interest rates seen in the market since the 1970's.
But what is making the U.S. economy such a mystery to experts and laymen alike? As in most complicated equations, multiple variables are in play. When trying to predict the state of the economy and its future direction, economists look for patterns. Economists believe this current trend can be attributed to several factors. Although the economy has been growing since 2001, we have seen increases in the national unemployment rate. Combine this with steadily rising oil prices, and the market traders who help determine mortgage rates are not entirely convinced of the economy's fundamental stability and the strength of the current recovery. In addition, the U.S. economy has been enjoying a large, steady influx of capital from overseas markets, which has kept the mortgage market very liquid. International investors from Europe and Asia are investing more heavily in treasury securities, which has helped keep the interest rates down.
Regardless of the reasons for this anomaly, consumers know one thing for sure: this is a borrower's market. Cooperatives seeking to refinance their underlying mortgages are no different. However, before you and the board of your co-op dash over to your local bank to refinance the building's underlying mortgage or seek additional capital for improvements or repairs, there are a few important things you should know.
Tax write-offs aside, and despite the fact refinancing will affect you directly as a shareholder, your co-op board does not have to put their refinancing plan to a vote amongst the shareholders--unless it is expressly written in the cooperative's bylaws. And most of the time, says Edward Howe III, managing director of New York City's National Cooperative Bank, it's not; your co-op board has the power to refinance an underlying mortgage or obtain additional capital without your approval as a shareholder.