Toni Arney

The Right Time to Buy?

Posted on 26. Jan, 2010 by toniarney in E-Magazine

Mortgage rates have been very low for quite some time. It was only, August 2008 when gas prices were approaching $4.00 a gallon and inflation was the primary concern that homeowners were gleefully taking mortgages at 6.5%.

Then a colossal market collapse sent the economy to the brink of chaos. Banks were being bailed out, a new President was elected, a war was on our minds, and people were wanting “new change.”

The Feds at the time made some adjustments that put a band-aid on the economy. One such adjustment was its backstopping of the mortgage-backed securities to the tune of $1,250,000,000,000. That is not a joke! The Feds used it to become the buyer of mortgage bonds. The goal was to use the extra demand to lead bond prices higher, which in turn, lead bond yields lower. Well, that is what happened.

Experts from the Fed say this intervention lowered interest rates by about 1 percent last year.

In other words, we’ve been getting low rates over the last year because the mortgage-backed market is “artificial”. The Fed is a non-natural buyer. Beginning April 1, 2010, things change, and it is back to normal. The Fed is putting an end to its support and the market is . . . well on its own!

For now mortgage rates are really attractive. There is growing hope in the markets after a huge election in Massachusetts. The dollar is improving, sort of. Inflation is tame. All great indications for low mortgage rates. However, sometime likely in February or March, Wall Street will start pricing bonds for the Fed’s Mortgage Backed Securities exit.

The prognosis does not look appealing. It will be quick and likely not pretty.

So, if you are looking to purchase or sell a home, have a solid plan in place. Don’t sit back too long and use hope as a strategy. Rates are low, take advantage of the market before things get unpredictable.

A good strategy if you are buying, get with Toni, and she will outline a game-plan to getting loan approval and having your plan in order. If you are likewise selling, Toni will help you take advantage of the influx of buyers who are looking based on this premise of uncertainty who are going to be new to the market. It is likely a short window to take advantage of.

by Jeff Payne, Loan Officer, TrustPoint Lending, www.trustpointlending.com

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