January 20th, 2009 9:54 AM by Andrew Walter May
I hear this question all the time. Quite frankly, no one and no company really has any idea. However, everyone has an opinion. With 22 years of mortgage banking experience, and an MBA from Duke University in Finance.....here's my opinion:
As of mid-January we saw the lowest rates in the history of the United States of America - for 30 year fixed. With the economy slowing, oil prices down, and a real estate recession demand for mortgages is lower than it has been in a decade.
Starting in mid-January rates tend to rise, and we've seen that happen already. Our best clients received rates in the high 4% range for 30 year fixed rates. Those rates disappeared quickly and have since crested 5% ....of course, if you pay points you can always get a lower rate and boast how low your rate it....not mentioning that you had to pay points (unknowingly buying the rate down).
Where are we heading now? My belief is that we've seen the last of these ultra-low "kick-start the economy" rates. We'll likely stay in the low 5% range for a while as the industry digests the trillion dollars of mortgage refinances. And then, starting in a few years, the economy on the mend, rates will go much higher. I believe that you can't issue $10 trillion in new debt and not have an inflationary event. Yes, it's $10 trillion. Everyone (economists) never mention the balance sheet effect - only the new debt issuance. FHA will likely lose $1-2 trillion.
We, anticipate that the fence-sitter will be looking back at their 6+% rate thankful that they have it, but disappointed that they could have been in the 5s. Of course, this is all speculation but it's a scenario that could easily unfold. Take care, and enjoy rates your grandparents never saw. Or for that matter, any US Citizen.