say goodbye

I’ve been working my database and telling past clients that if they’ve been thinking of refinancing they should do it now.  Right now.

I’m also doing the very same thing to those who have contracts in hand and are waiting for the right time to lock.

I’m right more than I’m wrong when it comes to interest rate predictions but I see rates moving up after the first of the year….and that’s soon, folks.

Last summer, I predicted rates would fall to current levels by year end then begin to creep back up.  But it appears they might be creeping back up a little sooner than anticipated.

Of course, no one can accurately predict these things but as of this writing 30 year fixed rates have lost nearly 1/4% in two weeks time.  That may not sound like much but when rates move above the 5.00% barrier then psychologically it sounds higher than it really is.

That’s why oil changes are $18.99 and not $19.00.  It just sounds better.

How high will they go?  I’m betting that rates will get into the mid five percent range by February (rates we temporarily saw last summer).  And that move does have an impact on affordability.

For instance, when interest rates are at 4.5 percent someone making $5,000 per month could qualify for a loan of around $325,000.

But when rates get to 5.50 percent that qualifying amount drops to about $290,000.  If a buyer put 20 percent down on each example that’s a sales price difference of $406,250 and $362,500 respectively.  6.50 percent?  Try a sales price of $326,300.

That’s an $80,000 dollar swing.

What’s causing this recent rise?  One, there are pockets of good economic news from better payroll numbers in November to higher pending home sales.  And inflation is currently no threat.

Finally, the Fed ends its mortgage-backed security purchases in March as expected.  Last September this desk wrongly predicted the Fed would extend the purchase to keep mortgage rates low but they’ve indicated the program will stop as scheduled.

It’s sort of a “bird-in-the-hand” scenario.  If rates are at near record lows now then why chance it?

The prudent move?  Lock and load.  And say goodbye to lower rates.


0 Responses to “say goodbye”

  1. Leave a Comment

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

December 2009
« Nov   Jan »

%d bloggers like this: