Mortgage Rate Predictions – How To Protect Yourself
Posted by Foreclosure Prevention in FinanceMortgage rates predictions have sunk to new lows this year, on the back of government manipulations of the money markets. Of course, we are all in favor of market manipulations that just might save the US financial system from total collapse – I’ll bet the Communists are laughing behind their hands right now – but the downside of market manipulations is that they make mortgage rates predictions somewhat less than straightforward.
Real interest rates are the nominal interest rates less the rate of inflation. Nominal interest rates are the mortgage interest rates quoted by banks and other lenders – the percentage rate per annum which you will pay the lender as interest.
Why does an academic exercise like calculating real interest rates matter for mortgage rates predictions?
The answer is simple – mortgage rates predictions will take into account tensions between the current real interest rate and the normal, or sustainable real interest rate. If the real interest rate is below normal, mortgage rates predictions will trend upward. If the real interest rate is noticeably above normal, mortgage rates predictions will trend downward. Economic pressures work to pull real interest rates back into the normal range, eventually.
What has confused mortgage rates predictions lately is that the government has been manipulating the money markets to hold real interest rates well below normal. In fact, real interest rates are currently negative. That is, when banks lend you money, the amount you repay is not even enough to cover the loss of value due to inflation. Mortgage rates predictions would be that banks can’t sustain those kinds of losses forever, and therefore, mortgage rates must rise.
We all watch mortgage rates predictions with the avid interest of fans at a baseball game, these days. We live in interesting times. The government is effectively printing money, so we can expect inflation to increase. At the same time, the government is holding down Federal Reserve rates and actively trading the markets to prevent nominal interest rates from rising.
Real interest rates are likely to remain negative for a while yet, which means that mortgage interest rates predictions are still looking at historically low nominal interest rates.
If you want to take advantage of the once-in-a-lifetime opportunity, lock in a 30-year morgtage at a really low interest rate, while you still can. Mortgage interest rates predictions are definitely going to rise, and if you have secured yourself a golden seat in the low-interest carriage, you will ride out those rises without risking a penny of your hard-earned cash.
We may never again see such low mortgage rate predictions – take advantage of the opportunity.
Entries (RSS)