This Week in Real Estate 3-20-2015 - Fed News

Rate rollercoaster into high gear?

From the Economist: “After a two-day meeting, the Federal Reserve dropped the word “patient” from its monetary-policy statement. Why the fuss over this single word?

’Patient’, in Fed-speak, indicates that it will hold off increasing interest rates for at least two meetings. Now the word has been ditched, at subsequent meetings (most probably in June) we could see rates move off from rock-bottom for the first time since 2008.”

From the NY Times: “’Just because we removed the word ‘patient’ from the statement doesn’t mean we’re going to be impatient,’ Janet L. Yellen, the Fed’s chairwoman, said at a news conference after the statement’s release. Ms. Yellen said the Fed was not declaring an intention to raise rates in June, ‘although we can’t rule that out.’

Her remarks suggested that borrowers have a few more months to take advantage of exceptionally low interest rates on mortgages and car loans, while savers face a few more months of exceptionally meager returns on their low-risk investments. And even after the Fed raises its crucial interest rate, borrowing costs may well remain comparatively low well into the future.”

Rates have been rising steadily since February. With the news coming from the Federal Reserve meetings this week, this trend is likely to continue.

-Kris

Home Tip of the Week.

Here is a Tip about locking your mortgage from one of my preferred lenders.

Locking Your Mortgage Rate

You’re out looking at homes to buy and hopefully at this point you’ve already submitted all the paperwork to be pre-approved for a mortgage. The next step after you find the right home is to get your interest rate locked in through your closing date. Decide on a rate and cost structure with your loan officer that you’re comfortable with and lock it. It’s often times a good idea to lock that rate just a bit longer than your escrow period. For example; if you have a 30 day closing it’s usually a good idea to get a 45 day interest rate lock, just in case there is some delay in closing. Even though you and your lender possibly do everything in a timely manner, the seller may have circumstances that can cause a delay, perhaps there are renegotiations that take additional time due to inspections, or maybe other delays due to matters that are just unforeseen at the start.

So, you think interest rates may get better and you don’t want to lock until later in the escrow period? Generally rates won’t change too much during the closing period and when you do lock, your lender will have to issue a series of re-disclosures which may take some additional time before drawing all the closing documents. Additionally, it is extremely hard to predict interest rates. When you (and everyone else) predicts they will go down, often they go up! They also go up much faster than they come down. So I would advise against this position, unless you happen to be in a much longer escrow period.

Dale DiGennaro

Custom Lending Group