Financing in 01129>Question Details

Christine M…, Real Estate Pro in Wilbraham, MA

The mortgage interest rates have dropped again. Do you think they will drop even lower or start to creep back up?

Asked by Christine M Moran, Wilbraham, MA Mon May 24, 2010

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I like to use the analogy of gas prices. When will they bottom out? We don't know until we see the increase at the pump.

Mortgage rates are very low now. On a $200,000 mortgage, a 1/8 of a point change translates to less than $15 a month. They may drop lower, especially with the economic troubles in Greece. But our federal spending is getting out of control and that might be a sign of increasing inflation.

Buy now and lock in a great rate.
1 vote Thank Flag Link Mon May 24, 2010
investors got scared. They saw the european countries having problems and put their money in what they thought was a safer place. The place was mortgages. Once investors feel a bit safer about their money I expect them to not want mortgages and interest rates to increase. Once inflation is showing its effects interest rates will have to go up.

It is possible that rates will drop 0.25% however, I would not count on it. It is possible rates would increase 1% and more. That is very likely depending on a few factors coming into play.
1 vote Thank Flag Link Mon May 24, 2010
None of us have a crystal ball, so it's difficult at best to determine where rates are headed. However, based on past performance of mortgage backed securities, I'd say that mortgage rates are about as low as they're going to go and will soon go back up.
Web Reference: http://LewisCorcoran.com
1 vote Thank Flag Link Mon May 24, 2010
Christine,

At the risk of being a cut and paste this one time. It's just far too much information and there is no other way to rewrite it. So here it is again............

Fact: From 1964 @ an average of 5.45% to 1977 @8.96% the rates fluctuated somewhere in between.

Fact: From 1978 @ an average of 10.35% to 1990 @ 10.48% the rates got as high as 18.45% and fluctuated between those numbers.

I am not a mathematician, nor am I an expert in lending practices. What I can tell you is that I lived through this period of time and it is not a selling tactic and it didn't happen hundreds of years ago. I find that since we're in the year 2000 and something, anything quoted from the 1900's or before is not very well received by people who didn't experience it. The bottom line is that no one knows for sure what is going to happen to the interest rates. Can you afford your dream home if the interest rates rise? Is being a home owner important to you? Only you can answer these questions and only you know the details of your finances.

The following is a chart of the difference that you would be paying for the same home at different interest rates. This is for P&I only- IT DOES NOT INCLUDE TAXES, INSURANCE AND PMI IF REQUIRED.

HOME PRICE $200,000.00
DOWN PAYMENT $7,000 (3.5%)
30 YEAR FIXED RATE

INTEREST RATES: 4.5% = PAYMENT OF $977.90
6.0% = PAYMENT OF $1157.13
7.0% = PAYMENT OF $1284.03
8.0% = PAYMENT OF $1416.17
9.0% = PAYMENT OF $1552.92
10.0% = PAYMENT OF $1693.71

The DIFFERENCE in your payment from lowest to highest would be $715.81 per month!

Now, as I said earlier no one can predict the future, but because it really wasn't that long ago that interest rates reached as high as 18%, I think it's only fair to remind you and other buyers of what the possibilities are.
Web Reference: http://www.lindacefalu.com
0 votes Thank Flag Link Wed Aug 25, 2010
Sometimes it is really interesting to see a post like this surface again, even if it's only a few months later, because we can answer the question after seeing what was posted right away. I usually remember where rates have been, but can't remember when they first dropped to 4.25%. Keeping in mind that rates can be different in state, and there are differences in lock period, points vs. no points, etc., we have clearly dropped in the last few months, so there is your answer. Each time the rate drops, no matter what the experts say, we wonder how it can go lower. I remember last January when everyone was saying that when the treasury stopped buying mortgage backed securities, rates would shoot up to 6% and over, and that ended on March 31st. Clearly, that is not where we are now. Can they go lower, your guess is as good as mine, and that's all it is, no matter which person with PhD in Economics tries to analyze where things will go.
0 votes Thank Flag Link Wed Aug 25, 2010
Mortgage interest rates cannot stay this low forever. They cannot fall much more. They will creep back up. We just don't know when that will be.

A voting member of the Fed stated earlier this month that the low interest rates were forcing Americans NOT to save and this one member wanted to see rates increase. He's in a 1-9 minority. But you never know the influcence he has.

My advice - lock in a great rate today with a local lender.
0 votes Thank Flag Link Wed Aug 25, 2010
Wouldn't be surprised to see it at 4% eventually. Nothing's going to turn around anytime soon. That and not many are really biting anyway as well, whether buying or refinancing. If not that, stagnation overall.

Any good-sized increase in rates would drop property values further right now...and I don't think many want to see THAT.
0 votes Thank Flag Link Tue Aug 24, 2010
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