Saturday, February 4, 2012

Mortgage Interest Rates Hit New Lows Again in Los Angeles

The Fed says that they plan to keep mortgage interest rates low for another year or longer, and it is clear that the interest rate that they care the most about is residential real estate mortgage loans.  However, please don't count too much on the ability of the Fed to keep these mortgage loan rates down.  They are the biggest player on the court, but not the only player. 

A lending institution needs to borrow money from others in order to lend it to you.  They may borrow the money from institutions or individuals, but they have to borrow it from someone.  In most cases, the lender only wants to own "part" of the loan, so they also must be able to sell the final loan to someone else in part or in whole.  And this all has to be done at a profit. 

Those institutions and individuals who are loaning the money to the mortgage lenders and buying up the final loans want to make a return on their investment, just like you do when you put money in a savings account or into a stock or bond.  As you know, putting money into a savings account today offers NO real return on investment as the interest rates on those savings accounts are less than even core inflation.  This is true for the institutions, too. 

At some point, the institutions are no longer going to be happy with the interest rates they are getting for mortgage instruments.  They will have other places where the risk reward potential is greater.  When that happens mortgage interest rates will increase, and they may increase dramatically.  And the Fed will not be able to stop it. 

Now is the time to act. You might get lucky and hit the bottom of the market.  You might save another 1/8th of a percent.  But you might also lose 1/2% by waiting.  Call me today at 310-295-2900 ext 113 and we can get the refinancing done at historic low rates.

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