I’m sure by now you’ve noticed that fixed rates on mortgages are at or near historic lows. Many people who have been able to take advantage of these rates have done so already. But there are many people who feel like they don’t qualify right now, or aren’t ready to buy just yet, who are VERY interested in figuring out whether or not rates will stay this low…and if so for how long. Well you don’t know unless you try!
With this as the daily backdrop in our industry, it’s not hard to understand why the question of “how long will mortgage rates stay this low” seems to be the first question I get asked when speaking to borrowers or others we do business with!
The truth is I don’t know how long rates will stay this low. No one can say for sure. However there are certain indicators that we look at which may lend some important insight.
What does the FED say?
The money quote recently released by the FED (shown below) offers an encouraging statement about the key financial question of 2012. In short, the FED suggests that lower mortgage rates may hold steady well into 2013.
“The Committee currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
While this may appear to be fantastic news, and the FED is well known for their accurate forecasts in the financial world, it is important to remember they do not set mortgage rates. Mortgage rates are driven by the financial markets.
However, the FED is not alone in its official opinion. There seems to a growing number of financial indicators that strengthen the belief that lower mortgage rates might be here for the immediate future.
The question of economic recovery
The economic problems of recent years are well known to everyone by now. But you may not realize that today’s low mortgage rates are at least partially a result of the government’s desire to stimulate the economy. Lowering the federal funds rate makes borrowing money more attractive and encourages the buying and selling of homes, which happens to be an important part of our economy.
Opinions vary greatly on how quickly we will recover from the recession, but generally speaking you can expect that as the economy becomes more stable interest rates will begin to rise.
How quickly the economy recovers, and how quickly interest rates will rise (and to what levels), remain to be seen and are very difficult to predict. However, inherently I think we can all agree that the economy can’t stay this bad forever, and that sooner or later rates will climb back to “normal” levels.
What should you do?
While we can’t predict when rates will increase or by how much, it seems like a fairly safe statement to say that they probably won’t get much lower than they are now! So if you’ve been watching for rates to dip much below their current level you may need to be prepared to wait.
If you have NOT yet taken advantage of these lower rates, a few things to consider include:
If you currently have a mortgage and have not yet refinanced, let a mortgage professional review your rate and terms to see if a refinance makes sense for your situation. There is no cost and no obligation.
Review your other debts and cash flow needs to consider if a cash out refinance might help given the lower fixed rates and tax benefits of having a mortgage versus unsecured or revolving debt.
Get pre-qualified to see if you might qualify for a mortgage to buy, especially if it’s for the first time. Even if you don’t qualify right now, we may be able to help you make a plan to get in a position to buy before rates change for the worse.
Rates this low have been especially attractive to investors who rely on positive cash flow on rental properties. If you have been considering purchasing investment property or refinancing now may be a good time to get a quote and have us run the numbers to see how they may apply to your situation.