Interest rates Creep up

Real Estate Agent with

If you are dealing with buyers on a budget you will have noticed that interest rates have crept up this week. Why ? The Federal Reserve is selling off some of their securities and buying mortgage backed securities.  This is another effort to rid us of the toxic mess we are currently in thanks to Wall Street finance people. Now when you sell securities you have to increase the yield on the securities to get people to buy. Right!  Over supply means higher interest rate. It is the old supply and demand thing. The Fed is walking the economic high wire trying to remove toxic assets so as to stabilize markets. But at the same time they have to keep their own sheet in balance so they need to sell securities. The net is a rate increase on mortgages. Here are a couple of things to remember.

1 Mortgage rates are at really low points. We are still under 6%

2 Talk to your buyers about responsible arms that may offer lower rates.

3 FHA loans are assumable. So if rates increase a buyer locking today will have an attractive package to sell later on

I do not think these rate increases are a sign of rampart inflation  as some doom and gloomers say. Of course I have always blogged that the number  1 fuel for inflationary fires is government deficit spending. So of course I am concerned. But I think these rate increases, if they stay moderate, and under 6 % reflect the Fed's efforts to balance a market and are not a bad sign.

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Charlie Ragonesi All Mountain Realty Big Canoe and Mountain Blog

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Vickie Nagy
Coldwell Banker Residential Real Estate - Palm Springs, CA
Vickie Jean the Palm Springs Condo Queen

I recently had a closing with an FHA loan and the title officer said it was assumable. I had no idea that ALL FHA loans were assumable. Thanks for sharing.

May 28, 2009 01:09 PM #1
Russ Ravary ~ Metro Detroit Realtor call (248) 310-6239
Real Estate One - Commerce, MI
Michigan homes for sale ~

I heard the rates really jumped yesterday.  I hope all of my clients locked in their rates

May 28, 2009 01:44 PM #2
Toula Rosebrock
Diane Turton, Realtors, Forked River, NJ - Lacey Township, NJ
Broker/Sales Associate, Realtor, Lacey Township,


Hi Charlie:

They sure did jump up yesterday.

For those who weren't already locked it, it was significant!

May 28, 2009 11:55 PM #3
Jim Valentine
RE/MAX Realty Affiliates - Gardnerville, NV

We had one jump big and the lender forgot to extend the lock when he extended the loan.  Cost him 2.5 points to buy the rate down. He covered it - class act.  The low rates really got the market going ... will be interesting to see what these still good rates do overall.  Thanks for the information.

May 29, 2009 12:36 AM #4
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Charlie Ragonesi

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