U.S. RESCUE BECOMES LAW! Now, Where Go Mortgage Interest Rates?
SHOULD STOCK MARKET FIND A BOTTOM, RATES MAY CREEP UP, SAYS ONE CHICAGO LENDING PROFESSIONAL!
The Bailout! The Rescue! Whatever you call the $700 Billion Plan passed this week and signed into law, its effect on mortgage interest rates, especially in the short term, may prove to be a mystery.
Rich Bira, President of First Capital Mortgage in Chicago, and one of the Dean's Team Chicago Preferred Lending Partners, points to the relationship between investor interest in stocks, versus bonds, as a clue that mortgage interest rates are likely to rise within the coming weeks and months. "I guess I'm saying that they're going to go up, on the sole premise that in the next few weeks to a month, the stock market will hit bottom and the stock market will get its footing."
Increased investor participation in the stock market could draw money out of more conservative investments in bonds. The relationship between bond prices and mortgage interest rates in inverse - the lower bond yields, the higher the mortgage rates, and vice-versa.
But, can anyone - expert or not - predict with any certainty whether the stock market will soon find a bottom? Further, how will the U.S. Treasury Department's purchase of distressed-quality mortgage assets proceed? If it fails to go smoothly, the stock market might continue to tumble in response, keeping bond investments high by comparison.
Further, how will Fed Funds Rate change short term. Will the threat of inflation keep that rate unchanged from current levels, or will the Fed lower that benchmark rate in an attempt to spur the housing market? And, if they do - will it have the desired effect?
Will U.S. Mortgage Giants Fannie Mae and Freddie Mac, which has already rolled back some previously-adopted fees on certain mortgages, introduce new policies geared at making more mortgage money available for buyers with mid FICO Credit Scores, or will the far more stringent loan approval standards in place this year continue, or get tougher?
In any event, a poll conducted by Bankrate.com released last week suggests U.S. Homebuyers may be seeing falling rates within the next month to month-and-a-half or so. Of panelists it polled, 2/3 predicted falling rates within the next 45 days.
Apparently, the jury is still out on the near-term future of home mortgage rates. But what transpires in the next few weeks will give us a clearer picture of where things will be headed.
See Mary Umberger's column today in the Chicago Tribune Real Estate Section for more info and insight.
DEAN MOSS & DEAN'S TEAM CHICAGO
