What I know and don’t know about rates

INFLATION: Currently it is non-existent. I know that inflation is the enemy but for now that enemy has retreated out of sight. This is good news for low mortgage rates. Future inflation is still a concern but not expected to be a factor for the first quarter of 2009.

ECONOMY: We are in a difficult recession. While this is bad for unemployed folks and corporate profits, it is good for the mortgage bonds and mortgage interest rates. Investors that need to invest money have options. They can invest in bonds with embarrassing low yields or they can invest in stocks and likely lose more money than they already have. Bonds aren’t great but they are the lesser of the two evils. I know that a poor economy is good for mortgage interest rates.

US TREASURY: Has committed $500 Billion specifically for the purchase of mortgage bonds. They are creating additional demand that has already served to bring down the mortgage rates lower and they have only spent 10% of their allotment. There is still $450 Billion coming into the bond market. In addition, foreign demand for our bonds has remained steady. I know that strong demand lowers rates.

What I don’t know: I don’t know what the rates will do today. They have been trading in a range of 4.75% to 5.25% for the month of January. Currently they are at the high end of that range. If the rates drop below 5% again, it will be easy to understand why. In fact, if the rates drop below 5% again we could say, “of course”! I know I am not a prophet, I don’t know if and when.

What to do now? Let preparation meet opportunity. Get ready and not greedy. The mortgage industry is very bogged down. The industry had been shedding jobs for two years and in the last 6 months they have been tightening up their approval process. Add record volumes to that and things move very slow. The best position to be in is “approved and clear to close” when the rates dip.

If you have a loan in process, please work with Maureen to get everything needed to underwriting for your approval. If you are contemplating a refinance, please call Renee and schedule time to sort out the pros and cons to determine if you need to move forward.

We are working very hard.

We want to prepare you for your next opportunity.

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