The Real Estate Center recently reported that there may not be a better time than the present to refinance your home. Their economist, Dr. Mark Dotzour said: “Inflation is clearly rampant all over the world, including in the United States,” he said. “When inflation is a problem, mortgage rates go up. Rates probably should be much higher right now, but they aren't.”
The report went on to ask a very important question: "Why are rates so low when inflation is not a fear but a fact? Dotzour says the fear of a global collapse of the banking system is greater than the fear of inflation for the world's bond investors. “Wall Street has a name for the phenomenon, and it's called the ‘flight to quality.’ When investors get concerned about global conditions, the United States is the haven of safety,” Dotzour said. “As investors moved money into U.S. Treasury bonds, the ten-year treasury rate dropped from 5.3 percent in August to 3.7 percent today.” Dotzour said investors who are using U.S. treasuries as a safe haven are willing to accept a 3.7 percent interest rate even though the U.S. inflation rate is at 4.1 percent.
Once the banking system is repaired and the fear of global collapse of the banks is over, Dotzour predicts treasury rates and mortgage rates will move up, maybe substantially. “If you believe that we are in for a global financial collapse, then don't refinance yet because interest rates will continue to fall,” he said. “If you think the U.S. government and the central banks around the world won't let this happen, then now is the time to get a fixed-rate mortgage at rates we haven't seen in the past 40 years.”
I totally agree with the concept of "refinance now" what with rates being so low - however it appears that the real dillema or catch 22 so to speak is that a fair amount of home owners have lost so much home value in the market that there's not enough value left in the home to allow a refinance. A lot of appraisals are coming in well under the current loan amount they have on the home. Plus, with tighter approval guidelines the lenders are limiting their approvals on TOP of the low values being experienced.
Posted by: TL the Home Refinance Loan Guru | February 25, 2008 at 08:00 PM