Understanding Mortgage Rates | dripp inc | Home Equity | Refinancing and Remortgage Guide

Good Morning,

Last week was a week to remember for the mortgage industry and will be included in the permanent history of our time.  Some thought it was inevitable after we experienced the real estate crash that was heard round the world, but most people thought it would be impossible.  Fannie Mae and Freddie Mac, the two largest Government Sponsored Enterprises (GSEs), were bailed out by the government.  As a result, mortgage interest rates plummeted for the majority of last week.  A mortgage rate below 6% became possible again.

Recent history has shown that government bailouts are a successful tool to revive an industry, but how and when will it happen for the mortgage and real estate industry?

It is very possible that the first step will be to make housing more affordable by dropping interest rates.  The lower the rate, the more opportunity for people to buy homes.  Remortgaging into something more affordable also helps to minimize future payment defaults.  There was a huge increase in mortgage applications last week because how low interest rates dropped.  Pre-approvals for new homes have increased as well.

The question I am continually asked is, “Are rates going to keep dropping?”

The answer is relatively simple.  If the current rate drops do not stimulate a spark for our real estate industry then rates will continue to drop until they do.   However, It will probably not happen quickly if that is the case.  It is also very likely that if mortgage rates remain at last week’s levels it will be enough to at least begin some kind or the real estate comeback.

Our analysis tells us that mortgage rates will remain close to or slightly higher than their historic lows.  In the meanwhile, glimpses of lower rates will momentarily reveal themselves to the few lucky people who actually follow the real estate market closely.

Our goal is to let you know when those time come so that you are part of the lucky few.

***BREAKING NEWS***

It was reported yesterday that Bank of America agreed to buy Merrill Lynch.   The initial reaction of the stock market should be very negative may help mortgage interest rates today.  We will keep you posted.