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My mortgage broker explained why the mortgage rate is so low...
invite response
2010 Sep 6, 2:41am 2,840 views 9 comments
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That is incorrect. The government is guaranteeing over 90% of new loans. That's compared to about 50% ten year ago. The private mortgage market has collapsed, and is not coming back for years, IMO.
The Federal Reserve bought 1.25 trillion dollars worth of mortgages, which no doubt lowered rates a bit. I don't think it's as significant as some would have you believe. The purchases stopped in April, and many economists were saying rates would begin to rise. Instead, they've fallen. The main reason rates are so low is the same reason Treasury bonds have such a low rate: People are saving (or paying down debt), nobody is borrowing, and most people are risk averse.
So essentially, your mortgage broker is wrong.
Bap33
2010 Sep 6, 2:27pm
HINT: the terms ‘broker’ and ‘agent’ are synonymous with ’salesperson’.
Caveat emptor.
excellant post Doc.
My wife and I signed a contract on a home last week. I figure rates couldn't get possibly any lower. I'm fully expecting the bond market to blow up sometime in the next year and a half.
I figure rates couldn’t get possibly any lower. I’m fully expecting the bond market to blow up sometime in the next year and a half.
In this case, the real question is: what you are expecting the housing prices to do when rates start to increase, perhaps uncontrollably?
As for bond market blowing up, it could happen only if trust in US govt repaying ability is lost, and thus it will result in seriously crippled govt borrowing ability. Considering how many things are being propped up by govt welfare, there will be plenty of things to worry about.
I figure rates couldn’t get possibly any lower. I’m fully expecting the bond market to blow up sometime in the next year and a half.
In this case, the real question is: what you are expecting the housing prices to do when rates start to increase, perhaps uncontrollably?
As for bond market blowing up, it could happen only if trust in US govt repaying ability is lost, and thus it will result in seriously crippled govt borrowing ability. Considering how many things are being propped up by govt welfare, there will be plenty of things to worry about.
I could care less what the housing market does when rates blow up. I got the price I was looking for and locked in 4.25%. If the bond market blows up and inflation rears its ugly head, my investments will have me owning this house outright.
theoakman, congrats on your purchase.
Do you mind telling me about your signed price is what percentage off from the peak price?
Goatkick
2010 Sep 10, 4:11am
My wife and I signed a contract on a home last week. I figure rates couldn’t get possibly any lower. I’m fully expecting the bond market to blow up sometime in the next year and a half.
Are u crazy ??!! Congrats :)
I was talking to my mortgage broker and he stated that the reason why the mortgage rate is so low is because the government is buying a ton of bonds at this low rate. Not sure how this happens, but ok. In doing so it generates a lot of refinancing. The government is no longer guaranteeing new loans through fannie/freddie. So when new refinancing occurs, new guaranteed loans are now off the books of freddie and fannie. Does this sound correct?
#housing