Interest rates have only one way to go…

Mortgage and Lending with Morgan Financial

Let me make a statement, and I hope you truly digest what I am about to say:  the interest rates on mortgages here in Brevard County, Florida are about 1/8% off of their lowest levels in history.  That means that if you qualify for a mortgage, you could potentially get a better rate on your loan than just about anyone in history.  With interest rates and home prices as low as they are, and with the first time homebuyer tax credit extended into 2010, people should be lining up to buy homes.  However, these rates have only one way to go, and we are headed there soon.

One of the biggest factors in our low rates right now is not the Fed's decision to keep the overnight rate as low as it is, rather it is from their decision to continue to purchase mortgage backed securities in the many Billions of dollars per week.  When this purchase program ends, the demand for Mortgage Backed Securities will be less, therefore the price will decrease, and the yield (or interest rate) will increase. 

Another factor that is keeping rates low, has been the low threat of inflation.  While inflation is not happening right now, there are many concerns of inflation coming once the economy starts to improve.  We are already seeing signs of inflation as the Core CPI (Consumer Price Index) came in higher than expected, and a little higher than this time last year.   It is inevitable that when you dump as much into the economy as we have, and when the cost of money is as low as it is that we will see inflation.  In inflationary times, bonds are not as attractive because they become devalued. 

So, with Inflation around the corner, and the Fed finishing their Mortgage Backed security purchasing program coming to an end in 2010, interest rates are going to increase.   The increase in interest rates will affect buyer's purchasing power, as well as their cost of money.  I have said it before, and I will say it again: Now is the time to buy!  Rates are low, but rising; home prices are down, but will go up; sellers are generous, but they will be greedy.  Please take advantage of this opportunity, before it goes away.   If you are currently renting, talk to a professional to see if you can buy; if you know someone who is renting, encourage them to see if they can buy. 

Ginger Moore
Wilkinson & Associates Realty - Gastonia, NC

Hi Joe, Nice article. yes the interest rates have not been this low in years. It is a fabulous time to buy a home, while rates are still low

Nov 18, 2009 07:11 AM
Associate Broker Falmouth MA Cape Cod Heath Coker - Falmouth, MA
Heath Coker Berkshire Hathaway HS Robert Paul Prop

The second year of a president usually sees higher interest rates, too.

Nov 18, 2009 07:11 AM
Dan Tabit
Keller Williams Bellevue - Sammamish, WA

Once this moment passes, it will be the time when many will say, "If I'd only known then..."  Well if they read your post, they do know.  Time to act!

Nov 18, 2009 07:15 AM
David Tapper
Coldwell Banker - Burlingame, CA

You hit the nail on the head, Joe. Not just in Florida, but here in California too. Actually, it will affect everyone, everywhere.




San Mateo Ca.

Nov 18, 2009 07:18 AM
Joe Harris
Morgan Financial - Melbourne, FL

Ginger, you are correct, rates have only been this low for a very brief period in time.  Spread the word!

Heath, the second year for this president will see unprecidented debt, unemployment, and a whole bevy of issues.  Interest rates will rise, but wait until 2011; thats when the stuff will hit the fan.

Dan, do you remember where you were when the interest rates avg. below 5%?  I sure as heck do - I was burried in my office under a pile of loan files!  Still am!

David, I lived in LA from 2003 to 2006 - I know that market, and WOW.  California leads the way in foreclosures and "Creative financing", so I am sure there are some outrageous deals there right now.


Thank you all for the comments.  Now go out there and continue to spread the word and help people understand why now is the time to buy.  Like Warren Buffett said "buy when others are fearfull, aand sell when they are greedy"  It is better to buy when the market is still going down vs when it is on the way up.  If you wait until the bottom has hit, then you are too late!

Nov 18, 2009 08:19 AM
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Eighteen Years Experience in Brevard County

Joe - Good information with a solid explanation. Let me re-blog this and see if I can get some buyers to move off the fence!

Nov 18, 2009 09:03 AM