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How low will mortgage rates go?

how low will mortgage rate go

Ronnie Margolis Real Estate Agent Kapaa, HI (808) 346-7095 Contact Profile

Since the Fed announced a plan to purchase $500 billion of mortgage-backed securities on November 25, mortgage rates have moved progressively lower, and the trend continued this past week. Conforming fixed-rate mortgage rates dropped to levels last seen in 2003. Weak Retail Sales data and low inflation figures released during the week also supported the move lower.

As the government strives to offset the current weakness in the economy, its actions have exerted a much stronger than usual influence on mortgage rates. Programs to purchase mortgage-backed securities and to provide capital to financial institutions have been favorable for mortgage rates, while a bill introduced in Congress this week could have the opposite effect if passed. The bill would permit bankruptcy judges to modify troubled mortgages by reducing the principal and payments. The goal would be to help prevent foreclosures, which is a worthy objective. However, opponents of the plan are concerned that investors may require higher mortgage rates to compensate for

the increased risk that loan contract terms may be changed. At this point, it's not certain when the bill will come up for a vote. Many folks are standing on the sidelines to see who amongst this housing crisis is going to get assistance, and from whom. It still remains a big unknown and a cause for uncertainty.

At Tuesday's Fed meeting, many are expectating are a 50 or 75 basis point rate cut, and the accompanying statement will provide the Fed's latest views on the state of the economy and the financial system. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will also come out on Tuesday. CPI looks at the price change for those finished goods which are sold to consumers.

We are now seeing interest rates in the 4's for those with pristine credit. How much better can it get for borrower's who can qualify?

By Ronnie Margolis Real Estate Agent with Keller Williams Honolulu on Kauai

Posted on December 14, 2008 10:52 PM

Category: Credit

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