Thursday, June 14, 2007

Going Up

As I left the office this afternoon, I ran into one of the loan brokers I regularly use. He was shaking his head, and I asked him what was happening. He said that interest rates got crushed this week.
Interest rates have been edging up for the last few months, but by very small increments. This week they increased by 3/8ths, and are starting to close in on 7%.
Part of the problem is that the Fed has indicated that they are not going to raise rates. While this has fed a growing stock market, it reduced the yields in the bond market. Traders have been getting rid of their bonds. but there has been no rush to buy them, and that has helped to push interest rates up this week.
In effect, even with lists prices for homes in this area holding steady, for the buyer, home prices just took a large step upwards, because the costs to borrow money went up sharply this week.
As I have stated before, even if you are in an area where home prices are falling, at some point, rising interest rates will cancel out that drop in price.
If the only reason you are waiting to buy in a down market is because you think home prices will drop further, take a careful look at what your mortgage payments will be with the rising interst rates, and make the smart move for you.