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What Will Happen To Mortgage Rates?
I was asked by a client last night, where will rates go now that we have a new President?
Maybe this little guy knows the future of rates. I am not sure who else would know for sure. But here are two things to consider. 1- During this rocky ride through the mortgage mess rates have gone down as the stock market went down and rates have gone up as the stock market has gone up. That may continue. When we recover is not certain. When we hit bottom with real estate sales and values is not certain. What is certain is that a bottom will hit and there will be a recovery. I believe rates will go up if you think the economy has turned around.
Tip: (Interest rates move on fears and hopes before facts) When their is a fear of inflation rates will go up, just based on those fears.
2- A new factor has been introduced through the so called bail out. This is important and may bring rates down. That is that the government is now mortgage money just as they are for those that loan money to the government. What makes loaning money to the government a safe place is the guarantee of the US Government. That is keeping the rates of Treasury notes around 2%. The safeness makes money looking for safety go to Treasuries. Mortgage instruments are now guaranteed in the same way but the market has not discovered or accounted for that, paying around 6%.
It is very possible a flood of money will start heading for Fannie Mae and Freddie Mac. Hope for that because that will make rates go down, more money available to loan, more people affording housing, and a jump start to the economy.
So, now back to the question – what will happen to mortgage rates? My answer: Go fish, I don’t know.
