Mortgage Rates are Still Low but Days are NumberedMonday, December 21, 2009

I have been stressing this message for the past 6 months, and since I cried wolf earlier I am sure it is harder to trust me now, but try ;-)

I am pretty conservative, and I was certain that inflation would be of more concern right now to the Fed than it is. With the enormous amount of government spending to try and pull us out of this recession, and 1.25 Trillion of it being directed at supporting low mortgage rates, I felt that rates would have to start coming up sooner than later to avoid hyper inflation - but so far that is not the case. But what we do know for certain is that the Federal Reserve will stop buying mortgage backed securities (mortgage bonds) on March 31st of 2010. They have also recently decreased the frequency of their purchasing, about one half of the amount they were buying up during the majority of 2009. So what does this mean?

1. Mortgage rates will become more volatile. The swing in rates will likely be .250% every week. Working with a mortgage professional that tracks the mortgage bond market as well as government policy is a must in order to lock in rates at their low points.
2. Mortgage rates will start to climb. The trend will be upward, and come March 31st, they will likely begin to climb quickly.

You First Time Buyers know that the current housing market is in a perfect storm; with low rates, low housing prices and large amounts of inventory. Also, loan programs still exist that allow low down payments and flexible guidelines (gifted down payment, non-occupant co-borrowers, etc.). Strike while rates are still at their low point and buy a home while the prices are still low ... oh, and I almost forgot - you will get paid up to $8,000 by the government to buy a home! Need I say more?

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