The Interest Rate Roller Coaster

If you've been waiting for interest rates to go
lower, you may not want to wait much longer.

As you probably know, interest rates have been
very attractive for several months.

After dropping below 5%, they have predominantly
been in the 4.5% to 4.75% range with a one point
loan origination fee.

Then suddenly last week, interest rates rose
dramatically. Within the course of 1-2 days,
the comfortable range to which we had become
accustomed blew up and started to hover above
5%. That is quite an upward move in only a couple
of days.

Now, by all historical standards 30-year fixed
rates in the 5% range are still very desirable.
But, because there had been such good opportunities
in the sub-5% levels for quite some time, it feels
like something has been lost.

It's always difficult to determine if market moves
like this are a blip on the radar screen, or if in
fact we have reached the bottom and rates are only
moving up from here.

There is little doubt that at least for the time
being, the investors in fixed interest rate issues
like mortgage-backed securities reached a level of
saturation last week.

There is a big concern about long-term inflation,
especially with all the debt that the country is
taking on. One of the strategies for paying back
the debt is to have the Treasury print money, and
that is inflationary.

If investors are going to be paid back with cheaper
dollars in the future, they want a higher rate of
return, so that they have some chance to get repaid
the yield that they were expecting.

There is no shame in obtaining a loan that is hovering
near 5%, but if you have been watching rates in the
4.5% - 4.75% range you may feel that you have missed
an opportunity.

My suggestion would be to assess your options and consider
locking in an interest rate before they have a chance
to go higher. Some lenders will allow a renegotiation
of an interest rate lock-in if rates go lower.

As they say in the medical profession "First, do no
harm." I have seen many borrowers miss out on something
good, hoping for something better.

Don't miss out on the property you want, or a better
interest rate on a refinance in hopes that rates will
drop again to where they were. It may happen, but
the risks are significantly greater if rates continue
to move up.

Call me to discuss your situation and we can strategize
as to the best course of action for you.