Monday, April 06, 2009

Mortgage / Refinance Rates - Home Equity, Conventional, etc

With mortgage interest rates being at super-low, rock-bottom, and certainly historically low levels, I have recently been thinking about how these rates really filter down to the consumer. I see home equity loan interest rates advertised as low as under 4 percent, though I am having a hard time determining if those are fixed-rate home equity loans (since they are quoted as Prime plus 3.25% or so), or whether, after taking out the loan, those rates are variable rate loans or somehow "float" over time.

I have seen 30-year fixed rate mortgage interest rates advertised at under 5% recently, though most often only if points and the like are paid (no-point loan rates seem to be just above 5% still regardless of all this talk I hear on TV of sub-5-percent loans).

Well, fact of the matter is that anything down in this range is quite reasonable considering the history of mortgage rates in the United States over the past decades. I remember the rates being quite high in the late 1970's and even through the late 1980's and early 1990's (my first home loan rate was something like 10.5% back then!!!), and it really is just amazing how people complain about "high interest rates" being anything over 5% (yes, I have heard people complain about this) even as I had to pay on a loan at twice that rate.

I calculated the other day how, if I purchased the same house now as compared to 20 years ago, I could have a payment that is literally just over HALF the amount of payment I had to make back then, and this is not even inflation-adjusted. If you throw inflation adjustment into the mix, the current-day mortgage payment would be essentially 1/4 to 1/3 of the payment. As such, I am just amazed that the housing market is still completely terrible. Sure, jobs are a major consideration, but wow... how much lower can rates go?!

I can not help thinking that it only makes sense to perhaps "step up" to a larger home or bigger yard or whatever while these lowest mortgage rates, lowest refinance rates, and lowest home equity rates in *forever* are available. I like my current house and yard, but I sure am feeling the "itch" to make a step-up now if I can.

The job market is bound to remain shaky, unemployment is sure to stay elevated for a while, but there is also one HUGE amount of fiscal stimulus in play (think: the Federal Reserve printing tons of money - TRILLIONS), that should get things flowing eventually. The only question is how long it will take for the Fed's, and Treasury's, massive injection of stimulus to start causing inflation. IF one would know that inflation is inevitable (especially re-inflation of some intensely-depressed home prices), then it would only make financial sense to purchase a property now, while interest rates are low, and hope for perhaps just a modest rise in interest rates coupled with a more substantial rise in home prices... that way, in theory, you can pay off the mortgage with post-inflated dollars.

But, who knows. Theory just does not seem to be panning out, since if it was, all this dollar-printing would drive interest rates higher (instead of lower) and also cause the US Dollar to devalue (versus getting "stronger" as everyone does the whole "flight to safety" thing). Macroeconomics, per what we were taught in College, is simply out the window lately, and this makes it tough to know whether these lowest mortgage rates, refinance rates, home equity rates, etc are all worth pursuing. arhghghgh. I need a crystal ball!

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