| rtgage rates near historic levels, many homeowners | | | | Federal Reserve began a course of slowly lowering |
| and home buyers are considering refinancing or home | | | | interest rates to spur economic growth, and to |
| purchase to lock in low interest rates. But other | | | | encourage potential homeowners to shore up the |
| potential borrowers are playing the waiting game, | | | | flagging housing industry. |
| watching the market to see if rates go even lower. | | | | Most leading economists, including the chairman of the |
| But with the economy in upheaval, is waiting the best | | | | Federal Reserve, believe one of the primary roles of |
| option, or should borrowers take the plunge and lock in | | | | the Fed is to instill and maintain consumer confidence in |
| rates now? | | | | the economy, and in the Federal Reserve’s |
| Most financial and lending experts say the time for | | | | ability to stem inflation. And, most economists agree |
| indecision is over, and borrowers interested in | | | | that the Federal Reserve I unlikely to drop interest |
| refinancing or buying a home should lock in rates | | | | rates again in the near future; rather, most economists |
| today. | | | | believe interest rates will slowly begin to rise as |
| When rates dipped to record lows in May 2009, many | | | | consumer spending increases during the nation’s |
| homeowners rushed to refinance, locking in rates that | | | | economic recovery. |
| were at their lowest levels in decades. And as rates | | | | Higher interest rates aren’t all bad; in fact, as |
| began to inch slowly upward later in the year, potential | | | | interest rates climb, the cost of most consumer goods |
| borrowers began to wonder if they should wait to see | | | | remains stable, or may even decrease. However, the |
| if rates once again crept downward. | | | | cost of owning a home can increase dramatically as |
| But according to today’s financial indicators, the | | | | mortgage rates mount. |
| nation’s economy may be in the early stages of | | | | For most homeowners and potential borrowers, locking |
| recovery, meaning the time for low rates may be near | | | | in a low interest rate now can yield thousands of |
| an end. Gambling on lower rates is risky at best, and | | | | dollars in savings over the term of the mortgage. Even |
| could be a strategy that ends up costing borrowers a | | | | a fraction of a percentage point can mean substantial |
| significant amount of money in the long run. | | | | savings when spread over the life of a 15- or 30-year |
| Whether or not the time is right for you to refinance or | | | | mortgage. Hesitating to lock in a low rate today can |
| take out a purchase mortgage is a personal decision. | | | | mean the loss of thousands of dollars which cannot be |
| But understanding the mechanisms that drive interest | | | | recovered. Considering most mortgages are timed to |
| rates down can help you, as a consumer, develop an | | | | be paid off by the time the homeowner retires, |
| awareness of whether or not the time is right to lock in | | | | neglecting to lock in today’s low rates can |
| your own interest rates. | | | | mean a much smaller nest egg when it comes time |
| The Role of the Federal Reserve | | | | for your own retirement. |
| The interest rates associated with both 15- and | | | | With the economy showing initial early signs of revival, |
| 30-year mortgages are tied to the yields on U.S. | | | | lending experts and others in the banking industry |
| Treasury Notes. Because these notes are auctioned | | | | agree that rates are not likely to drop lower. Playing a |
| on the open market, demand can vary, and usually | | | | waiting game and delaying a mortgage or refinance |
| correlates with the global economy. When demand for | | | | could result in higher interest rates, as well as higher |
| U.S. Treasury Notes is high, the yield drops; likewise, | | | | costs over the life of the loan. |
| when demand is low, the yield rises. | | | | For consumers still uncertain about whether or not |
| The Federal Reserve Bank determines certain interest | | | | today’s low interest rates can benefit them and |
| rates, and can raise or lower these rates in order to | | | | their bottom lines, speaking with a financial adviser or a |
| curb recession or stem inflation. Generally speaking, | | | | mortgage lender can go a long way toward |
| when signs indicate a recession may be imminent, the | | | | developing an understanding of the risks inherent in |
| Federal Reserve may respond by lowering interest | | | | waiting to refinance or obtain a purchase mortgage. |
| rates in order to encourage spending and boost | | | | Locking in a low rate now, when mortgage rates are |
| consumer confidence. Likewise when inflation looms, | | | | near historic lows, is a sound financial move that can |
| the Federal Reserve, or Fed as it is often called, can | | | | have a long-term positive effect on your budget over |
| raise rates. | | | | the life of your loan. |
| During the recent economic and housing crisis, the | | | | |