It never fails.  Every time rates go down, there are a number of borrowers and loan officers who start playing “The Rate Game”.  They think rates are going to stay down or continue to fall so they don’t lock their rates in, always hoping for yet another eighth of a percent drop.  Sometimes they get lucky and hit it right, sometimes the rates never go down enough and those borrowers and loan officers are left with loans that never fund when the rates go right back up.  Those borrowers are left with higher mortgage payments or do not get into that new home.  We are back in that wait game for many borrowers and many have already seen rates rise as much as .25% or more from where they were just 3 weeks ago. 

When we look at interest rates, there are many factors which go into the rates offered to mortgage borrowers.  Many borrowers hear Senators and others speak about Stimulus Packages and possible programs with 4% rates for homeowners.  They think it best to wait for a program like this.  Still others who watch the interest rates see the current Federal Discount Rate at .50% (it was 3.5% a year ago), the Prime Rate at 3.25% (it was 6.0% a year ago), and the Fed Funds Rate at .25% (it was 3.00 a year ago) and they think that mortgage rates HAVE to come down, right?  After all, mortgage bonds normally sell better when the stock market is not doing so well and when unemployment is up.  So with unemployment climbing to 7.6%, what better time for rates to come down than now?

But we also have the announcement by the Treasury that it is going to begin selling long term debt next week.  In fact, they announced that they intend to sell a record $67 Billion - $32 Billion in 3 Year Notes, $21 Billion of 10 Year Notes and $14 Billion of 30 Year Bonds.  They also announced that they will increase the frequency of 30 Year Bond auctions and that they will bring back the 7 Year Note (which incidentally, they have not auctioned since 1993).  Add to this a Stimulus Plan being debated in Congress that looks like it will be passed in some form, and if any additional funds are needed to bail out financial institutions, there will be an even larger supply of debt sales in the market in the future.

The end result for consumers is that interest rates have to climb to be competitive and for the mortgage bonds to sell.  All of those who have been waiting for rates to fall even further and have been sitting on the fence, may have just watched one of the best opportunities in many years pass them by.  Rates are still excellent, even though they are off the lows of just a few weeks ago.  If you can significantly improve your lifestyle by taking advantage of today’s rate environment, then waiting for the right rate might be now. 

When asked what interest rates are going to do, after 33 years experience, I still tell family and friends they’re sure to do one of three things, they’re going to go up, go down or stay the same!  My crystal ball broke a long time ago but it doesn’t take a fortune teller to see that today’s rates are still good and that there is a huge amount of uncertainty in the financial future based on what we do know and that those things outlined above typically do not spell good news for mortgage interest rates.  Could some other unforeseeable event occur which could alter an almost certain rate increase in the near future?  Of course, but that’s too much like gambling and if the rates today will help you and your family live better, why not take advantage of them while you can?