What affect will the government bailout have on future mortgage rates?

We are currently building a home and won’t actually secure the financing until February or March of 2009. What is the likelihood mortgage rates will go down and by how much? We plan on locking in a rate, but don’t want wait too long before they start going up.

By | 2013-08-25T19:18:57+00:00 August 25th, 2013|Mortgages Home Loans Interest Rate|2 Comments

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  1. Biran_Sefar August 25, 2013 at 7:19 PM - Reply

    The government bailout of the Wall Street fat cats will so cripple the economic lives of every single American for generations to come that only the super-rich will ever be able to dream of home ownership. We are fast on our way to becoming a nation of landless peasants.

    The rich get richer while hardworking Americans have less and less in their lives.

    Bush and McCain want to rob at least 700 billion dollars from hardworking Americans and their families to pay the salaries of all the super-rich fat cats on Wall Street. The middle class will essentially not exist any more if this thing ever passes. And, the criminals in Washington are co-conspiring with the criminals on Wall Street to see to it that our children, our grandchildren, and generations even further than that in the future will be reduced to virtual slavery in order to pay off this huge debt that the wealthy top 5% of the country has run up through CEO excess and criminal mismanagement.

    Let’s see some CEO’s get their salaries cut by two-thirds; let’s see their homes foreclosed and all of their belongings auctioned off. Let’s see their kids in rags, riding the school bus, and in line for the breakfast program in school. Let’s see some of those mega-wealthy CEO’s and their wives on the street corner with signs reading “Will Work for Food.” Because if they aren’t willing to pony up all of their assets, then why should hardworking Americans have to?

    Until the government is willing to bailout American workers and their families by ensuring they can keep their homes, by ensuring they have access to affordable healthcare, and by ensuring that they receive a fair, living wage in a safe working environment that is tolerant of workers’ collective bargaining, then I reject any so-called bailout the criminals in Washington propose.

    As long as the government cares more about bailing out the super-rich corporate criminals that have gotten fat off of robbing our economy blind and that have inflicted a far more serious wound against our nation than anything that resulted from 9/11, then I oppose any so-called bailout.

    Keep the heat up on Congress. Tell them NO BAILOUT FOR THE RICH. Bailout the American people!!! NOT CORPORATE CRIMINALS!!

  2. Dale H August 25, 2013 at 7:19 PM - Reply

    You should be able to get a lock with a float down option. That is, you can protect yourself from rising rates by “capping” your rate. If rates are lower once the house is substantially complete, you can float down to the market 30-60 days prior to closing.

    No one can say what will happen with rates with any certainty except they will change. However, it stands to reason that the rates should get better because now the Fed is explicitly guaranteeing Freddie and Fannie obligations so the yields on those securities (which drive retail rates) should fall until they are approximately equally to Treasury securities of the same maturity. At present, there is a 1% difference in the yields. The markets should adjust until that spread is substantially reduced. Otherwise, a smart investor would prefer mortgage backed securities over Treasuries as they have a higher return with no additional risk.

    For some reason, the markets have not reacted fully to this change, but that may be because the bailout is still up in the air. Freddie and Fannie assets are not the toxic assets involved in the bailout generally speaking, but they have lost favor with Foreign investors in particular since the crisis began.

    In short, you may not need to worry about what will happen with rates provided your rate lock allows you the option to float down once the home is nearly complete.

    Good luck.

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