How Low Will Rates Go?

Real Estate Broker/Owner with HomePlace Realty




The current interest rate enviroment is providing incredible opportunities for homebuyers in Newport Beach California and all other markets!  At the time of this writing, it is possible to get a 30 year fixed rate mortgage in the high 4% range.  WOW!  How would have thought? 

Now we have analysts saying that it cannot go much lower.  I do not agree.  Currently the 10 year treasury bond is at a rate of approximately 2.50%.  Historically, mortgage rates have been 1-1.5% above the 10 year treasury bond.  Imagine what rates will look like when the spread between the ten year bond and mortgage rates narrows to traditional levels.  Let's look at the math:

2.50% Ten Year Bond

1.25% Spread


3.75% 30 year fixed rate loans.


Combine this fact with the feds likely move to lower Fed Funds and/or the Fed Discount rate this week and we could see the 10 year bond fall even lower.  My guess is that the 10 year bond will not immediately fall and the fed cannot really push the short term rates much lower (ZERO is the lowest we can go).  However, the can start aggressively buying it's out bonds and force the ten year rates even lower.

The only way out of this economic crisis is to jump start the housing market.  I think 3.50-4.50% 30 YEAR fixed rate loans will do the trick.  Combine this with less foreclosures, which will lower supply and we could see insanely high buyer demand!

If you are even thinking about buying or selling, I would suggest getting off the sidelines and start taking some action fast!

The FED is putting the peddle to the metal, right now, the car is not getting traction and the wheels are squealing on the pavement.  Soon, the pavement will dry and the wheels will get traction.  The car will accelerate faster than ANYONE is anticipating!

Remember, the Mass is always wrong and currently the mass is predicting gloom and doom through 2009...I don't buy it and I hope you won't either.

As a former bond trader and lifetime Real Estate and Mortgage Executive, I have seen many of these cycles come and go.  Don't let this one fool you!

For more information on Buying Real Estate In Newport Beach California or any surrounding areas, please visit   I hope to see you there!

Dan Rawitch


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