Brexit for Breakfast, yum! So what does England withdrawing from the European Union mean for the mortgage and real estate market? Well, as I’m sure you’re already aware, we have had a massive sell-off in the stock market. The money that used to be invested in stocks, is now running to the safety of bonds. With the increased demand for bonds the price of bonds increases which, consequently, pushes the interest rate, or yield, of those bonds down. In turn, this translates into lower mortgage interest rates. So if you are buying a home or refinancing your current mortgage right now, your timing could be no better. Lower interest rates means lower payments and increased savings, something everyone loves! Additionally on the real estate side, these lower interest rates will increase your purchasing power and will allow you afford a higher-priced home without an increase in your monthly payment! The old adage that it only makes sense to refinance if you drop your interest rate by 1% made sense in the “old” days when most mortgage loans were around $100,000. But, most people have mortgage loans ranging from $300,000 to $600,000 and even .500% drop in interest rates could save you tens of thousands of dollars. So, for a free mortgage loan consultation to see if refinancing might make sense for you, or how much more purchasing power a lower rate will provide you, give me a call or shoot me an
Well, as they say, history has a way of repeating itself! In my last blog post before the Fed raised interest rates, https://thegreenhousegroupinc.com/the-fed-mortgage-interest-rates/ I had surmised that the Fed would raise the Federal Funds rate AND that mortgage rates would actually go down. To see what was going to happen with mortgage rates after the Fed ultimately raised the federal funds rate, I simply look to the pas. Having been through many of these before in my 20 years of doing mortgage loans, I determined there was a high likelihood of mortgage interest rates dropping, and that is what happened. Mortgage interest rates even hit the lows that we haven’t seen since way back in 2012. Now, this is not due, completely, to the Fed raising the federal funds rate, but more to macro economic events and the global economy. If you want more information on the direction of interest rates and the effect on real estate and the housing market, please reach out to me and my information below. Craig Sutliff Craig@GreenMeansGrow.com 619.857.4954
What if I were to tell you that the Fed raising rates will push mortgage rates down? History doesn’t lie! Do not fear the Fed. In the short-term, they have no influence on interest rates.
2015 Interest Rate Predictions are a funny thing. As with any prediction the truth will come so far down the road that most of the talking heads will be on to a new subject by then. The accuracy of their predictions long past. However, predictions can be useful when it comes to planning, especially when there is really only one way to go… up. Although they are not tied together, the Fed has already declared it’s intention to raise interest rates back to “normal” by the time inflation is at 2% and unemployment reduces to acceptable levels. Both of the indicators are moving in that direction and most of the predictions show rates rising in mid 2015. Of course rates will go up, they are virtually as low as they can be. So barring another recession, it seems that it’s an inevitable future. See a Bloomberg article about it here. SO WHAT? Well, for the housing market it’s like this – on a $400k loan a rise in rates of just 0.5% = $118/mo in payment. The more telling figure? That’s $25k in purchase power. So that means if interest rates rise but incomes are the same 1 – The same buyer can afford 25k less in purchase price 2 – That means it’s likely that the same house can sell for 25k less Pardon me, but there is a Giant
Another benefit of being a Broker is that we have resources beyond our own. Our lender partners spend way more money than we ever would on things like legal research, program analysis and market predictions. Here’s one such example of the value of our Partners – an interpretation of the Fed Press Release The Fed frequently publishes it’s discussion on the market and their likely pursuit of policy. This is important because the policy actually dictates short term interest rates. Additionally they are currently artificially keeping bond and long term rates low. This directly affects our industry as well as the market at large. In other words, what they say is pretty important. The hard part is it’s nearly impossible for the layperson to figure out what they are actually saying. Check this out. One of our Lender Partners has a legal / fiscal team that does an analysis of the Fed notes and does it in a cool way. This is just another way in which we can continue to be valuable for you. If you’d like to read it, I’ve embedded a portion of the text below. If you’d like to learn more about the what the insiders think about upcoming rates, or a full copy of this text, simply shoot me a quick email and let me know. Jeremy Beck Mortgage Planner Fed Mumbo Jumbo Interpretor –Here’s a portion of
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The GreenHouse Group INC Broker CA BRE#:01859042
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