Monday, August 15, 2005

Interest Rates

The latest raise in rates by the Fed last week may finally start denting the home loan market.
While fixed rates seem to be staying around 6% the spread between fixed and adjustable rates has almost closed to zero. This means adjustable rate loans may not be as attractive to consumers as they have been over the last few years. Interest only loans and "regular" adjustable rate loans will begin adjusting significantly upward as the Fed continues to tighten rates. For the consumer rates will likely be higher and therefore it may be harder to qualify for a home purchase or refinance. Perhaps rising rates will trigger a lowering of prices in some of the hot markets. Chances are rates will be raised in Sept and November to bring the over night rate to 4%. What happens to mortgage rates after that may determine the fate of the " housing bubble" we hear about everyday.

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