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Today’s Talking Point 9/29/09

Where are interest rates going?

Anyone looking to buy, move-up or refinance, MUST do it before the spring. Let me explain why I feel this way. Banks are not currently in the business of lending money to home purchasers. Why? Because, with all the risk associated with mortgaging and with inflation looming why would anyone make a 30 year loan at 5%? So banks, for sometime now, have been content to just collect the up-front fees associated with the loan and the processing fees associated with servicing the loan (billing, collection, etc.). The actual loan is financed by the government who has been willing to make loans at a lower rate in part to help stabilize the economy.

Well, the Fed announced last week that they will no longer be buying those mortgages after March of 2010. Once the government stops purchasing mortgage-backed securities and banks are forced to make the loans, rates will rise. History tells us that once they start to rise they will do so quickly and dramatically.

Again, if you are going to buy, move-up or refinance, DO IT NOW!


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