WHEN MORTGAGE RATES DROP REMEMBER THE BOUNCING BALL
March 21st, 2009 categories: Buyer Strategies, Mortgage & Finance
It has certainly happened before. Dropping mortgage rates then quick recovery of those rates.
This past Wednesday, the Fed’s giant mortgage market commitment contributed to pushing conforming mortgage rates to some of the lowest levels we’ve seen since World War II.
But whether these rates will stay down or bounce up a little is another question. After digesting the possible implications of all that new printed money, markets got nervous over inflation. And inflation is not a friend of mortgage rates.
The history is worth noting. Something similar also happened on these occasions:
1. After the Fed’s “surprise” rate cut in January 2008
2. After the Fannie Mae and Freddie Mac takeovers in September 2008
3. After the Fed announced its first massive level of support in November 2008
4. After the Fed zeroed out the Fed Funds Rate in December 2008
The pattern is like a bouncing ball. The energy from the sudden drop throws the ball right back up.
As things work out, not ever homeowner in the middle of refinancing saw it coming. But those who did lock in at the right moment got some sweet rates.
No one can perfectly predict these things. Bounces happen. But when they drop that quickly they are likely not to last. At least that is one interpretation based on recent history.
So, when you see a rate you like, remember the trade-offs involved in locking in vs waiting. What is here today, is sometimes gone tomorrow.
