Mortgage rates are not going to 4%, from Jack Minnig, The Mortgage Man

Real Estate Agent with McCarthy Real Estate PA# RS294585

Don't Even Think About It
We have had a Holiday present from the government. Yes, the Federal Reserve Board has lowered short term rates close to zero.  Yes, the government continues to facilitate the lowering of rates on mortgages by declaring their intention to support the markets for mortgage by purchasing mortgage-backed securities. However, don't even think about it. As much as we have said that the rates on mortgages must fall in order to facilitate a housing and thus economic rebound, they are not going to zero percent. They are not going to two percent. They are not going to 4%.  Why not?

The Fed controls short-term rates. When short-term rates go very low, the threat of long-term inflation increases. And it is this threat of inflation that will keep rates on longer-term loans high. There is no inflationary threat now, but there is the specter of inflation on the long-term horizon. This is especially true because the government is currently spending trillions on fiscal stimulus. In addition, the fact that long-term Treasuries have lowered is a direct result of a flight to safety during a crisis. There is no safer place to put investments than bonds backed by the US government. Mortgages are certainly not considered a safe investment. When the crisis abates, which will be good news, rates on Treasuries will rise. But if the end of the crisis brings a housing recovery, it does not mean that rates on mortgages will rise significantly because they will become a safer investment.

The message? We have the lowest rates in almost half-a century. Don't be waiting for better news!


Current Indices For Adjustable Rate Mortgages
Updated December 19, 2008


Daily Value

Monthly Value


Dec 18


6-month Treasury Security



1-year Treasury Security



3-year Treasury Security



5-year Treasury Security



10-year Treasury Security



12-month LIBOR-WSJ


3.844% (Nov)

12-month MTA


2.053% (Nov)

11th District Cost of Funds


3.125% (Oct)

Prime Rate


3.25% (Dec)






Comments (11)

Chip Jefferson
Gibbs Realty and Auction Company - Columbia, SC

I agree. I am thinking this will be as good as it gets. Thats why I personally locked at 4.5% last week. Down from 5.75%.

Dec 26, 2008 11:38 PM
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

I am with you. The window is closing. While we will have some small drops it is time to lock.

Good post


Dec 26, 2008 11:43 PM
Sasha Miletic - Windsor Real Estate
RE/MAX Preferred Realty Ltd. - Windsor, ON

Hi Stacey, Good post. Thanks for sharing.. Keep posting best.

Best - Sash

Dec 27, 2008 12:20 AM
Randall Schrader
Competitive Insurance of Dundee - Dundee, FL

I have been advising my clients to take action, NOW!

Dec 27, 2008 12:32 AM
Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

Great points

Dec 27, 2008 12:40 AM
Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production

I totally disagree, but for different reasons that I won't allay here.  I think that they're destined for the low 4's.  However, I totally agree that I tell my people to refi now.  No one truly knows.

Dec 27, 2008 12:40 AM
Jim Crawford
Maximum One Executive REALTORS® - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

I read an article where Paulson was asked directly about super low rates...he said it was not happening, and they had no plans.  It was not something that was in the works.  The current rates are great right now.

Dec 27, 2008 12:41 AM
Stacey McCarthy
McCarthy Real Estate - Philadelphia, PA

Thanks for the comments.

Larry, I didn't write this, but I don't know how you can declare you disagree when the low 4's is still not 4.

Jim, I did not read that article, thanks for the info!

Dec 27, 2008 01:08 AM
Richard Shuman
The Only B.S. I Have is from the University of Massachusetts - Lake Mary, FL
Real Estate Broker - Orlando Area - Love Referrals

You never know what they will come up with!  I hope they do go to 4% so everyone can refi and keep their homes!

Dec 27, 2008 01:12 AM
Brian Griffis
Realty Choice - Springfield, MO

Rates are great, long term rates are higher (almost always) than short term to compensate investors for taking a risk of having their money tied up longer.  If rates go much lower, why would banks want to loan to homeowners when there are more liquid, shorter term investments paying more?

Dec 27, 2008 01:12 AM
Stacey McCarthy
McCarthy Real Estate - Philadelphia, PA

Good point Brian.

Dec 28, 2008 12:47 AM