Another example would be merchants, such as fast food outlets, who perform quick swipes of debit cards for low dollar transactions. At the time of the swipe, the merchant has not actually routed the transaction to the card issuer and thus has not yet accessed the consumer’s account balance. In these cases, the merchant has accepted the risk of not being paid if there are insufficient funds in the account in order to move customers through lines more quickly. Finally, one industry representative questioned how the industry would be able to provide borrowers brokers with real-time balances if borrowers brokers make debit card purchases online or over the telephone.

Other Options Short of Providing Real-Time Account Balance Private investors at Point-of-Sale Terminals or MONEY LOANs Have Their Challenges and Limitations There are other options short of providing real-time account balances at point-of-sale terminals and MONEY LOANs that might assist in warning borrowers brokers of a potential overdraft, but each of these options has challenges and limitations.. The net result of the inability to provide borrowers brokers with a real-time balance …

Stevens signaled he may keep borrowing costs unchanged in coming months to gauge the economic impact of previous increases. Business confidence, particularly among retailing companies, fell in December to the lowest level in six months, a report showed today.

“This is a big relief and reduces the serious risk of a policy blunder” said Prasad Patkar, who helps manage about $1.5 billion at Platypus Asset Management in Sydney. “Three consecutive hikes late last year coupled with out-of-cycle increases by commercial banks appeared to have stung. A pause is welcome.”

The Australian dollar fell to 88.17 U.S. cents at 2:40 p.m. in Sydney from 89.24 cents just before the decision was released. The two-year government bond yield rose 2 basis points to 4.04 percent. A basis point is 0.01 percentage point.

As information about the impact of the bank’s previous increases “is still limited, the board judged it appropriate to hold a steady setting of monetary policy for the time being” Stevens said in a statement today.

World Leader
Stevens became the first central banker in the world to raise borrowing costs three times last year after Australia’s economy skirted the global recession, helped by A$20 billion ($18 billion) in cash handouts to consumers from Prime Minister Kevin Rudd and another A$22 billion in spending on roads, railways and schools.

By contrast, officials in the U.S., the U.K. and Europe have kept their benchmark lending rates at historic lows. The rate gap has contributed to making the Australian dollar the top performer against its U.S. counterpart since the start of September among the most-traded currencies.

There are signs Governor Stevens’s rate increases in October, November and December are restraining the mortgage market. Policy makers didn’t meet in January.

Borrowing for home buying fell to a five-year low last month, according to a report yesterday by Australian Finance Group Ltd., which says it accounts for more than 10 percent of the nation’s mortgage market. The group arranged A$1.55 billion of mortgages in January, 19 percent less than a year earlier and the lowest level for any month since 2005.

Mortgage Rates
Interest rates in the economy have increased by about 1 percentage point more than the cash rate over the past two years, meaning the current levels are consistent with a pre-crisis cash rate of “at least” 4.75 percent, Deputy Governor Ric Battellino said in a speech in December.

Battellino said on Dec. 17 monetary policy is “now back in the normal range” after lenders raised business and home-loan rates by more than the central bank increased the overnight cash rate target.

Australian & New Zealand Bank Group Ltd. boosted its variable mortgage rate by 35 basis points after Governor Stevens raised the overnight cash rate target by 25 basis points on Dec. 1. Commonwealth Bank of Australia raised its home-loan rate by 37 basis points and Westpac Banking Corp. moved by the largest amount, driving up its mortgage rate by 45 basis points.

Westpac’s move means households with a A$300,000 mortgage are being charged an extra A$1,008 a year, instead of the A$576 that would have been imposed had the bank merely passed on the Reserve Bank’s increases.

Business Confidence
“Interest-rate rises are not good for consumers full stop” Michael Luscombe, chief executive officer of Australia’s biggest retailer Woolworths Ltd., said in an interview last month. “I think 2010 is going to be a challenging year.”

Woolworths posted on Jan. 27 the slowest sales growth in a Christmas quarter since 1993. Consumer spending accounts for more than half of Australia’s economy.

Business confidence, particularly among retailing companies, fell in December to the lowest level in six months, a report by National Australia Bank Ltd. showed today. The bank’s sentiment index dropped 11 points to 8.

While all the economists surveyed by Bloomberg predicted an increase today, financial markets were less certain. Traders bet there was a 74 percent chance of a move, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 2:04 p.m.

Stocks Fall
Investors concerns that global growth may be weak this year are among reasons stock markets have fallen since the start of 2010. Australia’s benchmark S&P/ASX 200 index has shed more than 5 percent since Dec. 31.

Nouriel Roubini, the New York University professor who anticipated the financial crisis, said on Feb. 1 in Davos, Switzerland, that the U.S. growth outlook remains “very dismal” and White House economic adviser Lawrence Summers said the economy is still mired in a “human recession.”

Still, economists such as Annette Beacher at TD Securities Ltd. in Singapore say Australia’s economy will rebound faster than most.

A quarter-point increase today would have been “easily justified given strong Chinese growth, sticky core inflation, double-digit house-price gains” and falling unemployment, Beacher said ahead of the decision.

The economy expanded in the three months through September for a third straight quarter, house prices surged 13.6 percent in 2009, and unemployment fell in December to an eight-month low of 5.5 percent, reports published since the bank’s last meeting in December show.

Employers added 135,700 jobs from September through December as companies such as Chevron Corp. expand liquefied natural gas ventures to meet rising demand for energy, particularly in Asia.

The economic recovery in China, Australia’s largest trading partner, has been “much quicker to date and prospects appear to be for good growth in 2010″ Stevens said on Dec. 1. China’s economy expanded 10.7 percent last quarter, the fastest pace since 2007.

The rise in mortgage rates at three of the big banks comes at a time when the Bank of Canada’s benchmark lending rates have remained unchanged since early 2009.

The Bank of Canada’s “overnight rate,” the rate at which Canada’s banks can make short-term loans to one another, was set at .25 per cent in March of 2009.

The Canadian Bankers Association said many consumers are confused by the relationship between the central bank and commercial banks. The Bank of Canada’s rates have very little to do with mortgage rates, the association says.

“The Bank of Canada does not set consumer interest rates. While the Bank of Canada rate does influence the pricing of very short-term commercial credit, this is actually less than one per cent of funding for banks,” said Maura Drew-Lytle, spokeswoman for the association.

“Longer-term fixed rates are more affected by factors … such as prices in the bond market, the costs of longer-term deposits, and the competition for funds in the financial markets.”

The Bank of Canada does not lend money to banks to loan out in the form of long-term mortgages. The money borrowed from the Bank of Canada pays for daily transactions and closing costs between major banks.

Money for mortgages comes from consumer deposits and bank investments.

Mortgage rates are based on a number of variables. Banks must balance the amount they charge in interest with the amount they pay on consumer savings accounts. As the price paid on account interest rises, mortgage rates will also rise.

Banks also use other investments as yardsticks for mortgage rates. If a secure investment, such as a Canada Savings Bond, is paying three per cent annually, an investment such as a mortgage must be priced higher to cover for the risks involved and to ensure that the bank makes a profit.

According to Steve Foerster, a professor of finance with the Richard Ivey School of Business at the University of Western Ontario, inflation also plays a key role.

“If I anticipate higher inflation, then I am going to demand a higher rate,” said Foerster. “If one has to bet in terms of the direction of interest rates, it would be a good bet that rates are going to go up. More recent indications are that it could be sooner rather than later.”

Real Estate developers are not only attracting retirees, but they are also attracting an innovative young work force. Many developers are responding to consumer demands for a private piece of paradise where people can enjoy the beautiful scenery, but still have access to a vibrant and culturally diverse city such as Vancouver. Whether you are looking for a cozy and private residential home or looking for new real estate investment opportunities, British Columbia provides many real estate options for the informed investor.

Investors and home buyers are recognizing these opportunities. For instance, the average annual MLS (R) residential price in the province is expected to rise 2 per cent. In 2010, many experts are also expecting to see another increase of 4 per cent in the price of real estate. More specifically, home sales in 2010 are projected to increase an additional 8 per cent. Many regions across the Province are now seeing strong home sales. For instance, home sales in the Fraser Valley and the city of Victorian have seen a rapid growth in home sales. In fact, sales in Vancouver, the Fraser Valley, and Victoria have boosted the province’s overall home sales total to almost record levels. In December of 2009, The British Columbia Real Estate Association reported that Multiple Listing Service (R) residential sales in the province have made a remarkable increase this past November.

However, it is important to note that the demand in these residential sales markets is expected to level off in 2010 as demand is exhausted and home prices begin to rise again. With the current low interest rates available on mortgages, many experts suggest that it may be a good time to look at the real estate investment opportunities in British Colombia. As the economy slowly rebounds, one may find themselves with a lucrative investment in a beautiful province.

While home sales reportedly are declining, there is money available for loans, and with fewer qualified buyers looking for a new home, lenders are competing heavily for the mortgage business. While the prime rate may remain constant for long periods of time, the additional interest from which the lender reaps its income is being manipulated by many lenders to obtain new business.

Since most homeowners will only have one mortgage during their lifetime, repeat business will likely be in the form of refinancing and second home loans. By offering reduced interest and other costs associated with application processing and loan finalization, there are several lenders hoping for refinancing business from their home buyers, which typically carry a higher percentage of interest than the home loan.

Saving Cash On Search For Home Mortgage

Many people will haggle over the price of a new car and some will even attempt to negotiate over prices of high-ticket home furnishings, yet when it comes to their home mortgage they seem to happy just to be approved for the loan they do not question the interest rate on the most expensive item they will probably ever buy. By searching the best loan rates, they can save thousands of dollars over the life of the loan.

Costs often associated with taking out a mortgage can sometimes be waived or greatly reduced by a lender that is really interested in the new business. While no one will absorb all of the costs, any reduction they offer may be added to the down payment to reduce the principal amount, or as extra cash for furnishing the new home. With today’s competition in the home mortgage there is no shame is comparing rates and spurring competition among lenders.

Keeping your mortgage rates down, translates into lower monthly payments and can mean a better quality of life for the homeowner and their family. However, consider carefully if offered what appears to be a low rate on an adjustable rate mortgage and the potential consequences if the rates go up significantly.

Internet – that is your key to find the best remortgage deals. Fire up your search engine, jot in the term “best remortgage deals”. The number of links which are being presented before you are numerous in nature and hence you will have a better chance in finding that best deal quickly, without spending much efforts. The best part of the entire procedure is that is it completely free, you will not have to pay for the services which are being rendered to you y the search engines. The only investment in the procedure is the internet connection monthly charge.

There is stiff competition among the websites which are being presented in the search results, each striving to bring forth the best remortgage deals which is being hidden from the eyes of the common man. Hence, the quotes that you will be coming across in such websites will be free of any errors and will be regularly updated on weekly or monthly basis. The market has high liquidity, hence the mortgage rates are known to fall and rise within hours, if it is your lucky day you will be successful in finding the best remortgage deals from the internet.

If you like opting for the old school method, then it will also work out; the only difference being it will take more time to materialize than the initial step that we had seen in here. This involves visiting all the known financial agencies as well as banks in the vicinity and getting the various remortgages quotes directly from them. These are usually made available to the curious customers in the form of pamphlets. Taking them home and analyzing the various options that are being provided by the lenders will take some time. In certain cases, if you are new to this field, you will have to seek the help of a financial expert in this issue.

The best part of the deal is the considerable amount of savings that will be realized in the coming months by opting for a remortgage plan. The best remortgage deals can be found in plenty and most of them are custom suited so that they satisfy all the needs and requirements that are desired by the customer. However, providing the best remortgage deals, many more will be interested in opting for the paradigm of remortgage and mortgage in general. Fixed interest remortgages and variable interest remortgage deals are made available too.

Tax Credits
The clock is ticking for the residents of California. Time is running short and if you don’t make use of those tax credits soon, you’ll never be able to use them at all! Do you want to lose such a golden opportunity? Tax credits don’t happen every day so if you plan on using them, use them where you’ll enjoy maximum benefit such as with the purchase of real estate!

Low Mortgage Rates
A combination of various economic factors has resulted into record-low mortgage rates. But like everything else, this situation won’t last forever. Sooner or later, mortgage companies will reverse their decision and it will be back to the old days. Interest rates will be high and the application process will become stringent once more. You’ll have to take a good hard look at your credit rating and determine how to improve it in the quickest time possible.

If you want the chance to earn extra cash, now’s the time. And if you don’t want to risk spending that extra cash on something worthless then invest it in real estate and you’ll enjoy profit margins like you’ve never seen before.

High Supply, Low Demand
You can check any real estate website and all the news and statistics say one thing: supply is greater than demand. There are more sellers than buyers and every economic model agrees that when such a thing occurs, price will inevitably go down…but not for long.

Don’t you think it’s high time you take advantage of all those great prices for those great real estate properties? Remember: land never depreciates in value. It can only go up. Sure, it may reach rock-bottom prices during economic crises but if you ride it out, things will soon go back to normal and you can again look forward to enjoying a healthy profit from your investment.

The Future
Another thing that all the experts and analysts agree on is the fact that the near future is bright and rosy for the real estate industry. The slump this year, which will continue till 2010, is only temporary. After that, the real estate business is expected to boom again. If you delay your investment, you might end up paying more than you should and face tougher competition. Don’t wait for that to happen. Invest now and while you can!

Few did it on the scale of Ronald Burkle.
Mr. Burkle, the grocery-store billionaire, has $56 million in loans against two houses, including $9 million added last year. One is his iconic Beverly Hills mansion, “Green Acres,” a 44-room Italian Renaissance palazzo built in the 1920s by silent-film star Harold Lloyd that more recently was a favorite overnight rest stop for Mr. Burkle’s buddy, Bill Clinton.

Mr. Burkle declined to say how he is using the money. There is no indication he needs it to pay the water bill.

Traditionally, the super-rich didn’t really bother with mortgages. Home loans were for people who carry lunch buckets, not captains of industry.

That changed in the boom years — and it is still going on. Recent big-time home borrowers include fashion entrepreneurs, hedge-fund titans and baseball-team magnates.

Home loans “are a really good source of cheap capital,” says Robert Maguire, a real-estate tycoon who built some of the tallest officer towers in L.A. He has borrowed some $50 million against several properties, including his beach house, which features huge picture windows framing the Pacific near Santa Barbara, Calif.

He has been raising money with an eye toward regaining control of his property firm, Maguire Properties Inc., which he lost during the real-estate bust. Even as he borrows against his beach retreat, Mr. Maguire is trying to sell it for $29 million.

By hocking the house, so to speak, he and others say they are simply borrowing low in hopes of investing in something they believe will yield a high return.

And mortgage rates are near historic lows. In April, Mr. Burkle renegotiated his $56 million in adjustable-rate mortgages down to 3.25%, which was in line with adjustable home loans of a more mortal size. Recently, his rate adjusted down to about 2.25%, based on publicly available documents.

It puts Mr. Burkle’s mortgage interest charge at $105,000 a month, give or take.

Like ordinary home loans, megamortgages flourished during the boom earlier in the decade. The number of home mortgages in the $3 million-and-up category soared to about 3,000 in 2007, from only 1,100 or so in 2004, according to LPS Applied Analytics, a unit of Lender Processing Services Inc.

Not surprisingly, mammoth home loans got scarce during last year’s near-unraveling of the world economy. But now they are showing signs of coming back.

U.S. Trust, which is the private wealth-management arm of Bank of America Corp., has seen a 33% rise this year in home loans, compared to last year, with the average size over $3 million. Jan Reuter of U.S. Trust says clients are using the cash to buy stocks and other assets. Other major lenders tell a similar story.

The federal tax code doesn’t smile upon giant mortgages. It allows mortgage interest to be deducted only on home borrowings of about $1 million or less.

But there are ways around that, says David Adamo of Luxury Mortgage Corp., a mortgage-banking firm in Stamford, Conn. If the cash is used for investment purposes, the loan interest could be used to reduce taxes on income from the investments, he says.

Of course, plenty of rich people still avoid home loans. Partly, it is an image thing. Maria Elena Lagomasino of GenSpring Family Offices LLC, a Palm Beach Gardens, Fla. wealth-management firm, says a mammoth mortgage implies to her that someone is “borrowing because they have to.”

One rub for zillionaires who value their privacy: Mortgages are a matter of public record.

One of New York City’s classiest new addresses is 15 Central Park West — which along with the requisite pool, health club and movie-screening lounge, offers “30 climate-controlled wine rooms” with “solid oak cabinetry.” Since the start of last year, five buyers there have taken out mortgages ranging from $10 million and $35 million, according to public information collected by First American Corps.’ RealQuest data service.

Not all megamortgages have happy endings. Since mid-May, about a dozen home loans of $3 million to $9 million have been involved in default or foreclosure actions in Malibu, Beverly Hills and other fancy areas around Los Angeles, according to public data gathered by First American. None of the giant mortgages over $10 million examined in detail are in default.

Max Azria, chief executive of privately held BCBG Max Azria Group Inc. clothing company, took out a $25 million mortgage in April 2008 on a 12-bedroom, 13-bath West Los Angeles mansion, once home to the late TV producer and novelist Sidney Sheldon, according to public records. He bought the house in 2005 for about $16 million.

Last year, Moody’s Investors Service, the credit-rating company, said BCBG could face a cash crunch without financial help from Mr. Azria. A BCBG spokesman said Mr. Azria used the mortgage money for renovations and “additional personal liquidity,” and that the company restructured and improved its finances this year without funds from him.

Israel Englander, who runs the Millennium Management LLC hedge-fund operation in New York, last year pledged a home in a wooded, estate-filled section of Greenwich, Conn., as part of the collateral for a revolving credit line of up to $100 million.

Mr. Englander declined to comment. There is no indication he needed the money for anything other than investment purposes.

Besides signing multimillion-dollar baseball players, Frank and Jamie McCourt have accumulated homes with multimillion – dollar mortgages since moving to Los Angeles in 2004 to run the Los Angeles Dodgers. They bought homes and adjacent properties in both West Los Angeles and Malibu.

Their 15,000-square-foot, 10-bath L.A. manse, located in the prestigious Holmby Hills neighborhood across the street from the Playboy Mansion, was purchased in 2004 for about $20 million. For good measure, the McCourts spent $14 million to upgrade the place, including tearing out the tennis courts to install an indoor, Olympic-size swimming pool.

All told, the homes carry some $28 million in mortgages. The houses, which are in Mrs. McCourt’s name, are now part of a nasty divorce battle between the couple, who are fighting for control of the Dodgers.

The average rate for a 30-year fixed mortgage was 5.25 percent this week, up from 5.2 percent last week. Last year at this time, 30 year mortgages averaged 6.52 percent, Freddie Mac said.

Earlier this year, rates on 30 year mortgages fell to a record low of 4.78 percent, kick-starting refinancing activity. Last month, rates rose to nearly 5.6 percent after yields on long-term government debt, which are closely tied to mortgage rates, climbed.

The yield on the benchmark 10 year Treasury note rose to 3.70 percent from 3.67 percent late Wednesday.

” Bond yields rose slightly higher this week on market optimism that the economy may be stabilizing somewhat, and mortgage rates followed those yields ” said Frank Nothaft, Freddie Mac’s chief economist.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed-rate mortgage rose to 4.69 percent, up from 4.68 percent last week, according to Freddie Mac.

Rates on 5 year, adjustable-rate mortgages averaged 4.75 percent, up slightly from 4.74 percent last week. Rates on one-year, adjustable-rate mortgages increased to 4.8 percent from 4.77 percent.

The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point for 30-year and 15-year fixed mortgages. Five-year, adjustable-rate mortgages averaged a fee of 0.6 point, and one-year adjustable rate mortgages averaged 0.5 point.

Fear of inflation and concerns over the long-term impact of ballooning government debt have been driving up yields on 10-year U.S. Treasury notes, which reached 3.91% on June 8 before easing back to 3.84% the next day.

But hasn’t the Federal Reserve been working overtime to keep rates down? The prime reason for the Fed’s commitment to buying Treasury debt was to lower mortgage rates to revive the moribund housing market. That was starting to work, but economists are now warning that rising mortgage rates will stop any rebound in the housing market in its tracks and derail the broader economic recovery.

In its Weekly Credit Outlook published on June 8, Moody’s (MCO) said that the Economic Cycle Research Institute’s (ECRI) leading index of U.S. economic activity is now showing the recession nearing an end, with the possibility of higher mortgage yields the only remaining hindrance to a recovery.

The results of Freddie Mac’s Primary Mortgage Market Survey, released on June 4, showed a jump in the 30-year fixed mortgage rate to an average of 5.29% for the week ending June 4, compared with an average rate of 4.91% the prior week. Last week’s rate was the highest since the week ending Dec. 11, 2008. With Treasury yields even higher so far this week, the 30-year mortgage rate is being quoted as high as 5.50% on bank Web sites such as Citibank’s (C).
A Diluted First-Time Buyer Tax Credit

Mortgage rates should trade at a premium over 10-year Treasury notes to account for the greater risk. That premium has historically been between 150 and 200 basis points. The only reason mortgage rates have been so low is that the federal government is fully backing Fannie Mae and Freddie Mac’s purchases and insuring of conforming mortgages that banks have been making. If not for Fannie (FNM) and Freddie (FRE), banks would be charging home buyers much higher rates and would be required to keep the loans on their own books, says John Burns, a real estate consultant in Irvine, Calif. who advises the major homebuilders.

“The rise in interest rates is coming at a really inopportune time, just as the stimulus was taking effect,” says Mark Zandi, chief economist at Moody’s Economy.com. “It will hurt the housing market. It dilutes the benefit of the tax credit” to first-time home buyers.

With much of the weakness in the banking system having been addressed, Zandi believes the housing market is becoming the primary risk to the economy. But he also believes the bond market has gotten ahead of itself in anticipating a return of inflationary pressures. It makes sense, however. that as the economy gathers strength, the Treasury yield curve should normalize, with the 10-year note returning to somewhere between 4.5% and 5.0%, he says.

If Treasury yields are simply reflecting improvement in the economy, then it follows that the Fed shouldn’t do anything to keep rates low, says Ivy Zelman, chief executive of Zelman & Associates, which focuses on housing market analysis. The discourse among policy analysts and senior financing executives is increasingly concentrating on the high-wire act the Fed must pull off to ensure it doesn’t keep interest rates artificially low for too long and thereby stoke hard-to-control inflation, she adds.

The Fed could rein in yields with any indication that it plans to take a lot more Treasury paper out of the system via debt purchases, but that’s not likely, says Kim Rupert, managing director of fixed-income analysis at Action Economics. It’s very difficult for the central bank to keep a handle on long-term interest rates since they’re determined by other factors besides the amount of Treasury debt the Fed is buying.
Refinancing Activity Takes a Hit

Even if there weren’t other factors, “it’s a losing proposition for the Fed to try to fight an upsurge in yields via Treasury purchases” since its purchases can’t keep pace with the $30 billion to $40 billion in new paper the Treasury is issuing each month to pay for the economic stimulus, Rupert says. The ultimate impact of all the stimulus is a very large inflation threat, she adds.

Although over the long run the Fed certainly wants to reduce the mortgage market’s reliance on the Fed’s purchasing of mortgages, in the near term it can afford to increase its mortgage purchases in order to keep rates from going higher, says Zelman.

One worrisome sign, notes Zelman: She’s heard the hike in the 30-year fixed-rate mortgage to 5.50% has crippled refinancing activity. Deterioration in home values has caused many owners to lose equity to the point where they would only have positive equity in their homes if they got a rate between 4.5% or 4.875%. Rising rates appear to have boosted new home purchases, however, by pulling in people who were sitting on the fence since they’re increasingly afraid of missing the window of opportunity to secure a relatively low rate.

Fannie Mae and Freddie Mac have been watching mortgages on their books decline in recent months to a combined balance of around $800 billion. Since their combined ceiling is $900 billion, the government-sponsored enterprises have the capacity to buy up to $100 billion in additional mortgage securities, which would help lower mortgage rates, says Zelman.
Persisting Depreciation, Foreclosure Worries

There are also ways to bring the effective mortgage rate down, such as the Obama Administration’s tax credit of up to $8,000 for first-time home buyers, says Zandi. Anyone who hasn’t owned a home in the past three years is eligible for the credit as long as their income isn’t above a certain threshold. While the tax credit is slated to expire on Dec. 1, there are efforts to raise the limit to $15,000 and make it available to all home buyers, he says.

Higher mortgage rates in general are likely to exacerbate depreciation in home values, says Matthew Howlett, an analyst who covers the mortgage insurers at Fox-Pitt, Kelton Cochran Carolia Waller in New York. He expects home prices to fall an additional 15% to 20% over the next 18 months based on current mortgage rates and thinks they’ll probably decline further if rates go up, causing more people to default on their mortgages.

Mortgage rates would also rise for people who can’t afford to make at least a 20% down payment on homes they’re buying if companies such as PMI Group (PMI) and MGIC Investment Corp. (MTG), which provide mortgage insurance, were to fail. While rising default rates and claims are making it more difficult for mortgage insurers to maintain adequate levels of capital and liquidity, Howlett doesn’t believe any of them are in imminent danger of failing.

The insurers are depending on the moderate success of the mortgage modifications the Obama Administration is subsidizing in order to keep people in their homes. The Administration is targeting the prevention of 3 million to 4 million foreclosures. Any further downtrend in housing prices would hurt the chances of those modifications, says Howlett.

Mounting delinquencies of Alt-A mortgages-which are riskier than prime mortgages-will likely turn into defaults, creating a “tsunami of foreclosures” that will put the housing market under even more pressure, says Zelman. And it will be much harder to get those mortgages modified since they’ve been securitized and are in the hands of investors instead of the banks, she adds.