No, that’s not a picture of the interest rate Bogeyman. But it may well be the expression on your face if you wait much longer to refinance or purchase a home. Some consumers are still holding out, hoping for mortgage rates to go lower.
The interest rate Bogeyman is inflation. Inflation is the bogeyman, the monster at the ball, the uninvited party crasher that will bring an abrupt end to the abnormally low mortgage interest rates we have experienced for the last year.
One of the most frequently asked questions of me is, “Do you think interest rates will go lower?” To answer that honestly, I look at the latest inflation information from the United States and other countries.
Let’s see…In the U.S., energy prices up 4.1%, food prices up .1%, air fare up, medical care up, new cars up. U.S. producer prices surge 1.8% in November. Core inflation flat last month after ten straight monthly increases.
Around the world…food prices in India surge 20%, the Central Bank of the Philippines sees inflation inching up, the Central Bank of Thailand prepared to raise interest rates in 2010, Canada’s annual inflation rate higher than expected in November.
The Fed has helped keep mortgage rates down by spending 1.25 trillion dollars to buy Mortgage Backed Securities but these purchases are expected to be completed by Spring.
The Office of Management and Budget is trying desperately to reconcile massive government spending and a gargantuan deficit while holding interest rates and inflation at bay. These are some of the same brilliant people who in 2002 concluded, “On the basis of historical experience, the risk to the government from a potential default on Government-Sponsored Enterprise (Fannie Mae and Freddie Mac) debt is effectively zero”. Oops! Fannie Mae and Freddie Mac went into conservatorship in 2008 and are rumored to soon go begging to the government for billions more to stay afloat.
So, do I think that interest rates are going to go up or down?
Up…and soon!
Posted by Terry Brunner. Terry is a Senior Loan Officer with Horizon Financial. Terry can be reached toll free @ (877) 627-9211 x150 or email TBrunner@HorizonFinancial.org. Visit Horizon’s website at www.horizonfinancial.org
