Will Mortgage Rates Really Go Under 4%?
Posted on | January 17, 2009 | 7 Comments
First of all, we would like to thank Kevin and Mark for posing the questions about refinancing under 4%. There has been mention that mortgage rates will fall as low as 4% and we know many of our readers are interested to know if they can refinance this low. Right now, the answer is no. You will not be able to get a rate this low. That does not mean that things may not change in the future as the Federal Reserve is doing everything they can to make rates as low as possible.
Right now you are unable to get mortgage rates this low because the amount of subprime exposure in this country has caused the value of homes in many markets to greatly decrease. When refinancing, the appraisal value of your home plays a large part in getting approved for a rate you desire. With home prices declining, appraisals are coming in much lower causing mortgage rates to be higher than desired. If you feel your home has appreciated in value over the last three years and you have financial leverage then you are likely to get a rate under 5%, but it is HIGHLY unlikely you will get anything near 4%. At least not for awhile.
Check out our weekly mortgage rates predictions on Monday to see where we think rates will be headed next week.
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7 Responses to “Will Mortgage Rates Really Go Under 4%?”
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January 17th, 2009 @ 6:02 pm
[...] Random Feed wrote an interesting post today onHere’s a quick excerptFirst of all, we would like to thank Kevin and Mark for posing the questions about refinancing under 4%. There has been mention that mortgage rates will fall as low as 4% and we know many of our readers are interested to know if they can refinance this low. Right now, the answer is no. You will not be able to get a rate this low. That does not mean that things may not change in the future as the Federal Reserve is doing everything they can to make rates as low as possible. Right now you ar [...]
January 17th, 2009 @ 7:58 pm
[...] news by unknown « Subprime Blogger » How Weblogs and the Internet Will Change the [...]
January 17th, 2009 @ 10:16 pm
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January 17th, 2009 @ 10:16 pm
[...] Subprime Blogger » Will Mortgage Rates Really Go Under 4%? Related Reading: Mortgage Encyclopedia: An Authoritative Guide to Mortgage Programs, Practices, [...]
January 18th, 2009 @ 9:26 am
I feel almost certain they will drop below 4% Refinancing is the only tool left to put money back into a consumer economy, via lower mortgage payments – and its a good one. The fly in the ointment is that the value of homes keeps dropping – the banks don’t even have many foreclosed properties on the market and a new wave of foreclosures is expected in the second half of this year. So it would seem prudent to refinance a large mortgage sooner rather than later
January 18th, 2009 @ 2:27 pm
Another good article.
Lending is a money making proposition.
The Federal Reserve creates the money at the cost of printing it. Almost 0.
The banks loan it at no cost other than electrons and somebody to sit at a closing.
So the rate will go under 4% if the amount of people borrowing goes lower than the amount of people who borrowed last year.
The rates are purely based on maximizing profit for the banks. IE if you have 10 people willing to pay 10% and and only 12 people willing to pay 2% then based on the profit curve you are only going to loan at 10%. Very simplified but actually true.
So the real question is how many people will be able to borrow money compared to last year and how many people will want to borrow money compared to last year.
Right now people are optimistic with the new administration so that will help, but the problem is the loss of jobs which has not stopped but has actually accelerated.
You noticed I did not mention the cost or assessment of homes. It does not enter into the equation because if it did, we would not be selling homes at 10% or less of what it cost to build them. Right now homes in the bottom 25% are selling for about 2-3 times the cost of just maintaining them for one year. Forget about the true value or actual assessment of the property.
So were will the rate go? I believe the article is correct, the rate will go under 4% and may go lower until the loss of jobs is stopped. That will only happen with legislation which is what the new administration is doing.
The question is will the legislation help or hurt.
Time will tell and it will tell quickly.
January 29th, 2009 @ 6:01 pm
[...] Will Mortgage Rates Really Go Under 4%? [...]