Saturday, October 3, 2009

Market’s affect on Mortgage Rates

With the stock market in decline and the Fed’s lowering the Fed rates, many believe the 30 year mortgage rate should decline as well. That is of course not true.

Mortgage rates, especially the longer term rates, are based solely on the market’s long term outlook. Just because the short term interest rate decreases, the outlook on the long term market may remain the same. In short, the mortgage rates you see advertised (unless you’re doing a short term ARM) would not correlate with today’s short term interest rates.

What does this mean? This means you should not be trying to time the market when deciding when to buy a home. If you do so there is a great risk that you will end up missing the boat. The downturn of the market will only affect people who have used risky financing and/or stretched themselves too thin financially.

For the rest of America, it is a good time to invest in something material that you can use and see every day. Buy a home comfortable within your budget. Regardless of market conditions, a good home will keep you warm and safe, help you build equity, as well as help you weather any adverse market conditions.

No comments:

Post a Comment