Direction of Interest Rates, To Lock or Not to Lock

Dear Brave Homeowner, March 13, 09

After a couple of weeks of sweating it out with rates pushing 5.5%, we are finally seeing a move back downward, and are now approaching 5%.  I'm am going to repeat my consistent theme, which is, I believe we have seen the bottom of the interest rate cycle, but this time, I will throw in a chart to support my position, and a caveat that we could see a dip in the next week, or so. 

There is no doubt, that it is going to take either more massive government intervention, or another catastrophic economic event to drive rates significantly below 5%.  Here's where the caveat comes in; the UK government began purchasing UK government bonds a couple of weeks ago.  This action was very successful in driving European rates lower.  The US Federal Reserve Board is meeting on Tuesday, and Wed. of this week, and there is speculation that they may announce a program similar to the UK to purchase US government bonds, specifically, the 10-year treasury.  If this happens, we could see a significant move downward in rates later next week.  The chairman of the Federal Reserve Board, Ben Bernake, is being interviewed on 60 minutes this Sunday.  For those of you whose lives are as boring as mine, you might want to tune in, and hopefully catch some indication of what they intend to do in the near future.

Now, I know I've opened the door to those who have been rolling the dice over the past three months to continue to gamble, but I will still stick to my guns and state that if refinancing today is a sound financial investment, then do it today.  Click on this link to view a 3 month chart of 30 year fixed rates http://www.bankrate.com/brm/graphs/graph_trend.asp and it will show you that interest rates have been in a tight range since December.  As you can see, typically every two-three weeks, we catch a bit of a dip followed by a move back to the low to mid 5% range.  It is those homeowners that have submitted their loan application that have been able to capitalize on these short-lived dips.  By submitting their application, these homeowners have allowed their loan officer to call them at a moment's notice and secure a rate before it goes back up.  So whether you choose to take advantage of today's rate, or continue to roll the dice; I am once again going to encourage you to submit your application application to a lender today. 

I welcome a conversation about your mortgage, or the general direction of interest rates.  Feel free to email me anytime at gdevine@lmlcorp.com, or call me at 401 301 0130.  You may visit my web site at http://www.lmlcorp.com We are licensed in RI, MA, CT, NH, NY, and FL.