March 11, 2009

What's Ahead? Mortgage Rates Are the Reasons Buyers Should Buy Now

In today’s post we want our Buyers to take a look ahead to see what is likely to be coming in the future as it relates to mortgage rates. One of the best ways to look ahead is to look back for an historical view of what happened to interest rates when they saw a prolonged drop over a period of weeks. We thank Steve Harney, with SteveHarney.com, for these graphs showing the history of interest rates beginning in January of 2008 and ending in January of 2009.

As you look at this graph you can see the range of interest rates from a high of almost 6.7% to a low of 4.75%. You can see where twice the Government stepped in to take over Fannie and Freddie and later to add $500 billion dollars of money to bail them out. The reason for this bailout was to make sure that the market didn’t get worse and to aid the market by moving interest rates downward making homes more affordable for buyers.

Since October 31 of 2008 you can see almost sixteen weeks of interest rate declines with mortgage rates almost at the historic lows in the US.

In looking ahead, one only has to look back to 2003 when interest rates dropped below 5.75% only to see that each of the four times it dropped there were fast rebounds to higher interest rates. In other words, when the rates hit their lows, the rates increased rapidly back as new buyers entered the market.

This market data shows buyers that if they are waiting for interest rates to go down a few more basis points before they buy, the chances are greater that the rates will increase rapidly more than the chances they will go down much further. An educated forecast would show the probability of rates increasing is more likely than rates declining much further.

So if you have family, friends or work associates waiting to buy for the best of the best interest rates let them know that they are taking a greater risk by waiting than by buying now even if rates do go down a little more. The trends tell us that now is the time to buy. Here is a place to search for all the listings in Utah and don’t forget our free Buyers’ webinar every month.

Posted By: Steve Randall