RATES

As promised today starts a series of Blogs dealing with what is happening in the mortgage world today. Now don’t confuse this with anything other than what my opinion might be. For instance I know little about interest rates and what makes them do the things they do on a daily basis. My comments will be more directed to how rate changes apply to a borrower who is trying to make sense out of what he or she hears on a daily basis. The one thing I do advise my customers to do is this: If you hear me say rates will go one way or the other then do the opposite of the thing I tell you to do because I am usually wrong.

So what is happening with interest rates? The first thing you need to know is that what the Federal Reserve does has no guaranteed effect on what mortgage rates do. I did ask one person who writes an article to explain it to me one day and in his arrogant way he explained that. If the market perceives a Fed interest rate cut to be non necessary then mortgage interest rates will go up. If the market thinks the Fed made a good decision based on the state of the economy then mortgage rates will come down. Maybe he is correct and maybe not, nothing happens the same in all cases.

Now this is a fact, the rates at my company were lower before the Fed cut the interest rates than they are today. Now remember the Fed has cut rates twice in the recent past. Everyone that I talked to who was trying to make a decision on their loan immediately thought interest rates on mortgages would come down. Not so, and if you ask me what rates will do in the near future I will tell you they may go up, or they may come down, or they may stay the same. Now the smart people tell me that rates could really come down or really go up based on some kind of formula that I don’t really understand.

Remember this, mortgage rates are fairly stable and have been for a long time within a narrow range. Some time ago I thought rates would stay within 1% of 6.5% on the up side and down side and I think if you will look it has been that way for a long time. Maybe just a safe guess, but still accurate all the same. Now is a great time to buy a home, rates are on the low side of the average that I think we will continue to have and home prices are on the low side currently based on the current situation.

More to come

Lonny