Following the announcement from the Federal Reserve a couple weeks ago, the U.S. Government has also made the decision to use taxpayer funds (Treasury Funds) to invest in mortgage securities such as Fannie Mae, Freddie Mac, and Ginnie Mae loans.
This investment may be controversial to many Americans, but since it has been decided by our elected and non-elected officials, everyone should take advantage of the opportunity. This "investment" by the Treasury will most likely be a good one for several reasons. Tradionally mortgage backed securities have been a solid investment (especially when viewed over the life of a typical loan) and will continue to do so, although not for some time. When the economy turns around, we should once again begin to see appreciation in home values, decreasing the liability and risk assumed by the Treasury with the committment.
The second reason this will be a good investment is because giving homeowners the opportunity to obtain the lowest interest available in a lifetime will allow for greater freedom and flexibility with household expenditures. There will also be a great benefit since less interest will be paid over the life of loans on homes, in addition to millions deciding to pay homes off earlier than originally anticipated with current loans.
I expect to see the current rate range of 4.75-5.5% to continue for the next 4-8 weeks, most likely lasting into February, after one or two more Fed meetings. If the economy begins to pick up, and unemployment starts to table off, we will see rates begin to move upward due to inflation worries. Currently there is no indication there is a concern about inflation, but under normal circumstances we would already be seeing it.
Talk to an advisor on how to take advantage of the current interest rate market for your home, auto, college loans, and even short term loans like lines of credit.
The savings will be worth the effort!
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