While the media and Washington continue to chatter about the slowing economy and mortgage/real estate market, interest rates are already at all-time lows. In fact, rates have not been this low since 2003! If you, your clients, or anyone you know are looking to take advantage of these low rates, let me explain why NOW is the time to act.
You may have heard the Fed talk lately about the 4.5% 30-year fixed rate mortgage. Will it become a reality though? Frankly, it was a bit irresponsible of the Fed to even whisper those words. The Fed only has the ability to control the Fed Funds Rate, which generally has the opposite effect on long term mortgage rates due to inflation.
It is unclear how the Fed can possibly set or mandate a 4.5% interest rate. What has occurred thus far is the Fed announced recently they would begin buying up to $600 billion in mortgage backed securities (MBS). Mortgage rates are tied to mortgage backed securities. This announcement has already driven rates to historical lows. How? It assured traders that if they need to sell, the government would be there to buy. So traders jumped back into the market and began buying with a big appetite which improved mortgage rates. Once the Fed begins to buy MBS, it may spur additional activity, but there is no guarantee that rates will float down to 4.5%.
In January, the SEC is meeting and information may be released that could have a significant bearing on rates, potentially for the worse. I'll be writing about this in the coming weeks.
Mortgage rates are currently in the mid- to low-5% range. In late January of this year rates dropped almost this low - but it only lasted for a half a day. If you...or friends and family members you know...are contemplating seeking financing, now is the time to act. Gather your paperwork and get your application in process so you don't miss out.
Lenders are already becoming backlogged due to low interest rates. In 2003, with rates at these same low levels, we saw some lenders taking up to 90 days to close a loan.
Realtors - advise your clients to be pro-active. Get their paperwork in order so when they find their perfect home they can lock in their financing.
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