FOLLOW UP - Myth: Mortgage Interest Rates Will Plummet in 2008

Real Estate Agent with RE/MAX N.O. Properties

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!

Read Also:

Are We Heading into a Recession?

New Orleans Real Estate - The Definitive Blog


Comments (2)

Chuck Willman
Utah Homes - Alpine, UT
Utah Homes
This can be such a hard one to explain to the average buyer... still- I can't complain at all about the rates. They're still great. 
Feb 23, 2008 04:22 PM
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate
I guessed the same thing. So many people here the "fed is cutting rates" and the wrongfully assume this means that 30 year fixed rates will drop with them...usually not the case for the reasons you mention.
Feb 27, 2008 02:12 AM