FED’s DRASTIC REDUCTION IN RATES CREATES UNPRECEDENTED OPPORTUNITIES
Categories: As Heard on the Street, Front Page, In The News, Mortgage News
hiMortgage blog from Scott Neitzel
An article on CNBC (www.cnbc.com/id/28295084) notes that homeowners are rushing to refinance their mortgages, which are at their lowest rates since the 1960’s.
The Federal Reserve is supporting exceptionally low interest rates by buying mortgage backed securities and Treasury bonds in an effort to provide a stimulus by increasing the money supply.
By increasing the money supply, the Federal Reserve is making the borrowing rates lower, in turn allowing more people to borrow. The money spent will stimulate the economy. The Federal Reserve is using this overwhelming force to prevent deflation.
Since implementation of the stimulus package, the amount of credit has actually increased, but confidence is still low. The Fed’s efforts are addressing what is now more of a confidence crisis than an actual money-availability crisis.
We’ve seen a dramatic increase in phone calls over the last 48 hours, and not just solely for refinancing.
People who are waiting on the sidelines until the market “hits bottom” are realizing that these extraordinarily low rates will probably be with us for the next 4-6 months, as they are aimed at kick-starting lending, and will not remain low indefinitely.
So what can you tell your buyers? Here’s a little formula I believe you’ll find useful and compelling… the monthly payment with a 1% lower rate, is identical to receiving a 10% discount on the property for our average loan amount
To make it even clearer for a buyer; if someone purchases a home today and takes out a mortgage, they’d pay below 5% (the national average for a 30 year fixed). If that rate goes back to 6%, it’s the equivalent of a 10% increase in the price.
So the correct answer is…buy today because these mortgage rates are unprecedented. That coupled with what we believe is a bottoming, or near-bottoming of prices in general, make for an extraordinary opportunity for the thousands of qualified buyers who have been sitting on the sidelines waiting for – I believe – exactly this type of rate drop.
Good luck selling, and remember, we’re at your disposal.
