What to expect for Rates?

If any of you have been following the mortgage market with us, one would realize that this is a very volitile market we are dealing with. With that said, we have seen falling rates as the trend for the last month or so. Why may you ask? In this authors opinion, it would be a combination of a couple things, but most importantly a result of the impending election, the fact the economy is faltering badly, and the possibility of another round of quantitative easing being introduced by the FED.

To be sure, in any election year we see politicians going out of their way to maintain status quo. They certainly don't want anything drastic occuring in the runup weeks to election day to derail any platforms they may be running on. This applies to all facets of the government, sorry to say.

The economy is in the dumps...far be it for this author to state otherwise...Interest rates are at historic lows in the hopes of stimulating borrowing...spending...investing. Labor costs and material costs have been rising, unemployment is approaching 11%. Even with the astronomical amount of money being pumped into the economy, we are still flirting with deflation. The world markets are in the same disrepair and the exit still looks years away.

Enter the FED. At the most recent FOMC meeting, the verbiage specifically left open the option for further intervention by the FED into the markets in the form of quantative easing. For those of you who are unfamiliar with the term, a central bank(FED) first credits it's own accounts with money it creates "ex nihilo"(out of nothing), then goes out and buys financial assets including, but not limited to; government bonds, mortgage backed securities, agency debt, and corporate bonds from financial institutions in what is referred to as open market operations. In other words, the FED cranks up the printing presses and "pumps out the benjamins" to purchase other institutions debt in the hopes that by refilling the coffers of said institutions this will stimulate the economy.(think more loans and monies available for consumers, small business etc...)

Will it work? Who knows what the future is going to hold. What we can assume is that rates will remain very competitive for at least the near future. Currently the best qualified borrowers are commanding 4% on 30 year mortgages for conforming(<417,000) loan amounts. We have seen some lenders in the past week post 3.875% on their rate sheets, but unless you are quite savvy and/or work with a broker who has realtime mortgage feeds, your timing will need to be impeccable. Best of luck grabbing one of these historic low rates before they dissappear!

Caveat....After Nov 3, all bets are off. There will undoubtedly be changes in policy moving forward from that point....as I mentioned earlier, none of the politicians wants to rock the boat right now.