Mike's Financial Blog

Many economists have said that the low rates are behind us. However what rate are they talking about? Is that the Prime rate, the 15 or 30 year fixed mortgage rate, the 10 year treasury bill or the Fed Discount Rate? Yes I have confused you on purpose and here’s why. When you listen to the news they could be throwing any and all of those rates around and they always relate it to mortgages. Remember the news people are the worst ones to listen to for financial advice, period. The news often comments about the Fed lowering and raising rates as though they actually control mortgage rates falsely leading consumers to think rates will go up or down when Ben Bernanke speaks. The Fed only controls the rate that banks get and that rate has nothing to do with your primary mortgage. Mortgage rates are market driven. In fact by the time Bernanke speaks the mortgage market may have already increased rates several weeks prior so you’d have missed the boat. In many cases by the time the Fed raises their rate mortgage rates could be coming down a bit. Your retail bank loan officers don’t know this, only a seasoned mortgage broker can help guide you through this.

So back to the question what will rates do? Well while it is true that our economy is showing signs of improvement and rates have come up in the last 4 months and it’s true that rates on 30 year fixed loans have been as low as 4% in 2010, 5% is still very low historically albeit not makings of a refinance boom. These are however 30 year fixed rates. Depending on your time horizon you may be interested in a lower rate 15 year loan or even a 5-7 year ARM if your plans are to move sooner. So if this fits you then rates are still very low in the 3-4% range! It is more important to compare your current situation to the available options and see if it makes sense for you. Every loan and situation is different. In addition there is no rule that you have to save 1 percent for it to make sense. Saving half a percent can save you hundreds per month. Actually rates can move around by as much as a half of a percent every month! However barring another Enron debacle or major war effort rates will continue their slow rise with dips along the way. With that in mind you should meet with an experienced broker now to see what makes sense. If it doesn’t make sense then maybe you can wait for one of those rate dips to lock in. I look forward to helping any way they can. Contact