As we head north of 2 Trillion dollars in economic stimulus, many denizens are excitedly expecting. Unfortunately, the average American isn't in line for a bail-out. In his testimony to the Senate Banking Committee, Fed. Chairman, Ben Bernanke stated it pointedly, "If there is one message that I'd like to leave you with, if we're going to have a strong recovery, it has got to be on the back of a stabilization of the financial system. It is black and white."
In a healthy banking market, lending institutions margin an average profit of 3%. If they pay 4% to borrow the money, they lend it to us at 7%. With the Federal Funds Rate hovering around 0.25%, banks now have an opportunity to double their expected margins. And that is exactly what they are doing. There is no emphasis being placed on lowering interest rates below their current levels, especially for refinance transactions, as that would erode the profit levels on these products.
So for those expecting mortgage rates to bottom at 4% or 4.5%, it's time to stop waiting in line, that's not where the monies going, and you will miss today's opportunities.
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