If my last post about rates left you wanting more information, a great article appeared on CNN Money today that I thought explained what is going on with rates very well.
It spoke of a "new conundrum" that is happening with long-term and short-term interest rates. It is similar to what happened to the 10 year bond and 30 year mortgage rates when Alan Greenspan hiked short-term rates, they remained low. Now that Ben Bernanke has lowered short-term rates the same thing is happening that happened before, they are staying the same if not going higher. In other words they are going the opposite of what you would expect them to do.
So what will interest rates do in the near future, no one really knows. I think the article explains it well:
The rising long-term rates are a sign that there are no easy answers as the Fed and Congress struggle to keep the economy from falling into recession. Volatile market reaction to the Fed's moves is proof that investors aren't sure where the economy is heading.
Giddis said there is likely to be more volatility in the bond market during the next four weeks leading up to the Fed's next meeting on March 18, as the debate continues between those who believe the economy has already toppled into recession versus those who think these cuts are an overreaction that will fan inflation.
"What happens with rates between now and then depends on the data we get in between," he said. "The numbers become really, really important."
How does this all apply. Well, if you are okay with where rates are today and are considering buying or refinancing a house, do it. Don't wait! Yes, rates could go lower again and you could save a little money, but if they don't and you still need to refinance out of your ARM or want to buy a house can you afford them if they go higher?
http://money.cnn.com/2008/02/25/news/economy/conundrum/index.htm
1 comment:
This is very cool. It is very informative and helps those of us who don't know much about all of this. I would never be able to know all of this on my own, so this is a great resource. You are a good writer, too, so it makes it very easy to read and understand.
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