Idaho Mortgage Rate Report >> Is cheap money over?
Lock mortgage rates now if you can
For the past 12 months the Federal Reserve was aggressively lowering the discount rate in an attempt to stimulate the economy. When the Federal Reserve lowers the discount rate mortage rates normally rise. The reason this happens is that the Discount Rate is the rate that banks borrow money at and is not a reflection of mortgage rates. When banks borrow money at a lower rate they pass this on to consumers via personal loans, credit cards, etc. The bond market views this as fuel for inflation and therefore mortgage rates typically rise in reaction.
It has appeared for some time now that the Federal Reserve is pretty much done with lowering the discount rate which should be good for mortage rates if the fear of inflation from other factors was not looming. I have felt for the past few weeks that we should have seen lower mortgage rates and my reasoning was that 1) The Federal Reserve is done lowering the discount rate, 2) The high rate of foreclosures and short sales across the country is a reflection of how bad the real estate market is across the country and 3) With gas and commodity prices skyrocketing consumers would be spending less and less on retail items.
That would have been good but just recently the commerce department said May retail sales rose 1 percent in a reflection of the effect of rebate checks. Even though there is a glut of homes in most parts of the country there are areas in Texas, Washington State and North Carolina that have not been affected by the subprime fallout.
Just three weeks ago Bank Rate reported the 30 year mortage rate was sitting at 5.75% This rate as of Friday the 13th of June, 2008 the rate was sitting at 6.29% for the same 30 year mortgage. It seems that any sign of inflation, as small as it may be is causing fear in the bond market causing mortgage rates to rise.
Yes folks, any bad economic news is good for mortgage rates in general. Anytime the economic news is positive, ie; retail sales, durable goods orders, automobile sales, consumer spending, etc. are strong we will see mortgage rates rise.
There is just enough feeling in the market that the economy is showing signs of life and as long as that is the case we will see mortgage rates continuing to rise. In my opinion, these higher rates have been offset by falling home prices. Idaho Real Estate can be purchased in Southwest Idaho for as much as $20 per square foot less than they were selling for just 3 years ago. In one case I recently sold a wonderful new custom home for $87/foot. This home would have easily sold for $115/foot just three years ago.
We don't know how long home prices will stay low so my advice is that if you find one of the thousands of great deals out there in the housing market, that you take advantage of it lock in your home price and mortgage as well.
Start your Idaho Home Search here before home prices start rising as well.