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Are rates going to drop to 4.5-5% (and what does that mean)?

Posted on December 3, 2008 by Ray Williams (NMLS #216267).

You might have heard today that the treasury department may devise a plan to drop mortgage rates to 4.5% or so. ARE YOU SERIOUS? That is the first thing I think about as a mortgage professional. But you have to read between the lines. This is something that is being talked about, and that is in the beginning stages of being talked about. Also, this would be for people buying homes, NOT REFINANCING!

How would they do that?

“The Treasury would fund the purchases by issuing Treasury debt at 3%, suggesting the government could make a profit on the difference”.

What would this potentially do for the housing market?

The thought is that it would help people who currently are priced out of the market, to be able to qualify for and afford homes. If that happens then the demand would rise, thus causing supplies to shrink. Home prices would then start to increase. Once that happened we could see the ability for folks without equity to potentially refinance out of their troubled loans. It might create a nice real estate cycle to help all. Although those folks without equity would have to be able to hold on during that cycle.

The word on the street is that if there is any plan put in place, it wouldn’t be done until the Obama administration takes over. Food for thought: “They may have their own ideas or plans?”

Stay tuned~

Ray

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