12/10/08
Explanation about mortgage rates and HOW LOW WILL THEY GO?
 | By David Hahn Read more of David's posts |
Over a week ago (over Thanksgiving), we saw the lowest fixed rates in history—we were at 5.25% with no origination, again for a short time. So what happened? Clients were email who would benefit immediately, and only a few acted and received those rates. The rest exhibited the typical “greed” and quoted the “news” that the rate is supposed to go to 4.5% (seen on CNN and other news stations). Now, rates have ticked back up a bit, so many folks missed an opportunity.
What did we learn last week?
- You don’t know what you’ve got ‘til it’s gone. (You don’t know where the bottom is until we pass it.)
- You must not believe all you see and hear in the news. Use common sense! With the highest unemployment in years and people uncertain about their income and jobs (therefore, no consumer confidence), would even a 1% mortgage rate matter, let alone 4.5%? Lower mortgage rates are not the “silver bullet.” There are bigger issues.
- Low mortgage rates are not turning around the housing market—at least not yet. In the past, we have seen low rates with climbing housing prices or high rates keeping a lid on the housing pricing. Today’s historic low mortgage rates at the same time that we have low housing pricing are something I have not seen in my years in the business. I would think that customers would be lined up outside your doors and mine taking a number to make an appointment to grab the rates and the housing bargains. What is everyone waiting for? Obviously, there are more pressing issues (like unemployment) that need to be solved.
Volatility in the market continues. The FEDs meet next week and there is speculation that they will cut the Fed Funds Rate again, but remember, this does not equate to lower mortgage rates. The cut will lower the PRIME rate, but many users of home equity lines are already at their floor rate (there is always a ceiling and a floor rate on home equity lines).
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