Mortgage interest rates will go much lower in less than a month. Wait, interest rates will go higher in a month. No, wait, interest rates will go much higher by the end of the year, possibly to double digits.
So, are you confused? Where are you getting your information from? I have heard both from the news media and the government that they will lower rates. We heard back in November 2008 that rates would go to 4.5%. But you can go to 4.5% now, but depending on the loan amount, the LTV, and your credit scores, it could cost you anywhere from 3 to 4 points to get that rate.
Well, thanks to the new stimulus bill, there is major talk about lowering the interest rates. And some reports are stating as low as 4.0%. Wow, that would be awesome, or would it?
Okay, let's clear the air. In my opinion, lower rates will hurt us than help us. I have my reasons, yet I am not the only one that thinks this. Please click on this link to hear some scary news. Yahoo Finance It's around the 3:59 minute mark to 5:20, that is the part about interest rates. And I wrote about some of this here... please read : I need my quick fix, please pass me that 4.5% interest rate And I think this is very important, which was talked about in the video. Inflation vs deflation. Is it criminal?
So what is the argument by some that lower interest rates are good? It lowers your payment. In my opinion, how many of you would agree that it would just allow more people to buy a bigger home instead? Instead of saving that money monthly. And if that was the case, then it would just help those to refinance. But wait, anyone that had interest rates like 7.25 percent and or higher, would have refinanced even 2 months ago, when rates were in the low 6's to high 5's, if it made sense. Ah, those that couldn't before, probably can't now, because of bad credit or no equity in the home. So this helps those that bought in the last year with interest rates in the 6's. hhhhhmmmm Interesting thoughts....
What do you say? Thoughts?
And keep this in mind, don't you have a comfortable payment in your mind? If not, your loan officer should be asking you this question and not dwell on what you can afford. So, back to the payment. If so, and that payment doesn't change, but a lower interest rate? You just buy a bigger house and not save that extra money. Yes, there are some arguments on the other side of this fence, but that is for another post.
Conclusion : So let's think about all of this? Are you a true blue gambler? You want to buy a house now, you can afford it, but you decide to wait a month, because you heard that rates will come down even more. What happens if they don't come down?
You can refinance to a 5% fixed rate with 1 point and that would save you around $200 a month. And you plan to be in the house for over 5 years. But wait, you don't want to do it now because rates are coming down. The media and government said so. But what happens if they don't?
Food for thought.... We all have heard that the government are buying up MBS's, which are mortgage backed securities. But what we don't know are what coupons they are buying. Are they sinking our money into the 4.5% coupons? The 6.0% coupon? How about the 6.5% coupon. The federal government doesn't set rates for mortgages. Interest Rates can change daily due to the different market changes. My thought on that? Even if the gov't bought the MBS's, which would lower rates, how long would the rates stay low? We have already been through this a few times. Rates would stay low for a day or two and then climb back up.
My advice? Stop listening to the media, politicians, gov't, and those in the mortgage industry that will tell you to float your rate. If you can refinance now and it makes sense, do it. If you had planned on buying, that you can afford it, and that you feel positive about it,.... then do it. Don't wait for false hope, it could bite you in the arse. Talk to a mortgage professional about this, to see what your options are now. But if someone tells you to float now or wait later? You be the judge of that when or if that day comes. Do you want to take that gamble?
On a side note, here is a post written by Colleen Craig - Giving those of us that missed this information the other day..
And a post by Robert Ashby, why he thinks rates will go up and soon. I fully agree with this and have stated that rates will be in the 7's and 8's by the end of the year. I think this is spot on ... Please read :
- FHA Loans - USDA Loans - VA Loans -
- Energy Efficient Mortgages -
- Conventional Loans - 203 k loans -
- Mortgages -
Experience & Knowledge at its BEST !!!
For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2008-2009 Tax Credit for First Time Homebuyers : 2008 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!
Copyright © 2009 by Jeff Belonger