The mortgage world has been sent completely on its ear lately, with bailouts, credit problems, foreclosures and more. What can we expect to happen? It is vital to make an intelligent guess about how interest rates will go.
Tight conditions in the mortgage world should normally lead to lower rates, since lenders would have to lower rates in order to attract customers with excellent credit ratings. But it appears that banks are really increasing rates, in the hope that will improve their income.
Under normal circumstances, this would seem like a foolish choice since the usual route to increased earnings is to lower prices. But it seems that in today’s crazy financial world, the ancient choices do not apply and banks are getting their cue from credit card companies to raise instead of lower rates.
In prior times, a slower economy normally meant lower interest rates which would bring in more customers. Matters are not like they were before, but, and new rules seem to be in order.
So what is the solution for a potential homebuyer with the right credit score to borrow? Take a wait and see attitude and hope that matters will return to normal, with lower interest rates, or take advantage of any credit that can be obtained, regardless of the rate?
Not only is there a current, there are many who even feel there is a depression coming, which will then lead to deflation. Normally, deflation will in turn mean lower interest rates, so this indicates a wait and see attitude is the best to take right now.
There are banks who are still granting mortgages. Many small banks are not suffering from the credit crunch that has hurt many huge lenders. Some were just too small to venture into perilous loans.
A second supporting argument for waiting is that home prices continue to plummet, with predictions of futher price cuts of as much as 35%, even after the 20 to 25% decreases already seen. The Case-Schiller study published in November of 2008 reported annual decreases of 17% nationally, with 25% in some locales. The scene seems to be perfect not only for lower interest rates, but lower home prices as well, with the wise homeowner putting off his plans until the entire mess is sorted out!