Recently, the Federal Reserve has
begun to go through with their latest and greatest stimulus plan to help flip
this economy right side up. The strategy has included lowering the interest
rates to record lows.
This blog post covers the good, the
bad, and the ugly of this kind of strategy to help you, as a home buyer or home
owner, to decide what is best for you.
The Good
The Quantitative Easing 3 is being
applied and used to buy up mortgage bank securities to help in the effort of
saving our economy. Their plan seems to be to buyout $40 billion in mortgage
bank securities a month, but here is the kicker.
They have yet to set any real
boundary or ‘end date’ to this effort. In fact, they may very well go on buying
up these mortgage bank securities forever. The Federal Reserve has made it
clear that they will only halt the process of Quantitative Easing 3 if there is
a drastic improvement in the economy and labor force.
The Bad
Okay, so lower mortgage rates
couldn’t possibly be a bad thing, right? For starters, rates are already at a
historical and record breaking low. We have never been in such a buyer’s market
before.
Sure, this does make things easier
on the consumer and if the rates go a little lower (which they have), it’s even
better, right? All of this is true, so what is bad about this whole thing?
The bad is what could come and it
definitely leads to something disastrous and ugly. We will start by letting you
all know that the rumors of below 3% interest rates on a 30-year loan are
really just rumors. It could happen, but it wouldn’t be for a couple years and
what causes it would likely be a catastrophic hit on our economy or the
collapse of a super power.
The Ugly
Everyone loves a deal, but there is
a reason that unless your favorite clothing brand is going out of business you
will probably never see something marked down at 90% off. So, why is this?
Profit, pure and simple, so when you
start seeing record low mortgage rates getting lowered after you jump for joy
on the savings you might stop to think how are they doing this? That is where
the problem is -- over the next few years if the economy doesn’t improve, the
rates will continue to lower and further sink the ship.
What it means
This means that caution is the
operative word. It also means that it is a good time to jump into a home.
At Indigo Mortgage, we believe in
the facts, we know everyone wants in their dream house, and we want to help
make that happen, but you have to know what you are getting into and prepare by
being informed. Let us help you!
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