FOLLOW UP - Myth: Mortgage Interest Rates Will Plummet in 2008
I wrote a blog post on my New Orleans real estate blog a few weeks ago stating that mortgage interest rates are likely to rise amidst all of these rate cuts by the Fed. Let’s take a look at where we are now and see if I was right or wrong!
Click here if you haven’t read the initial blog post: Myth: Mortgage Interest Rates will Plummet in 2008
So guess what…I was RIGHT…whoohooo! Well, not that exciting since being right means that interest rates have gone UP in the past two weeks. In fact, long-term mortgage interest rates have risen by about .25%. Not so good for those of you looking to buy New Orleans Real Estate. This mortgage interest rate increase follows that basic economic principles that I discussed in the previous blog. When blond prices drop, mortgage interest rates typically rise.
Also, January retail sales were announced and they were positive so people started sinking money into the stock market, which drives bond prices down. Not only that, but one of the largest bond insurers credit rating was downgraded by Moody’s. That means bonds are potentially riskier than normal causing bond prices to go even lower. So home loan rates were doomed from the start last week!