Finally the effects of the $700B bailout as well as other world factors have brought some confidence back to the market! For over a month we have been hovering with par rates ranging from 6.25% to 6.5% on a 30 year fixed loan. We even saw the largest one week increase in rates in over 20 years in October.
There are many factors contributing to the long predicted interest rate decline, many of which we have previously blogged about. The effects are finally trickling into our financial system as today a par rate on a 30 year fixed loan has reached 5.875%. By the end of the month we predict to be back near the 5.5% par rate we were at when the Feds took conservertorship over Fannie Mae & Freddie Mac. Those were huge confidence boosters that were drowned out by the massive industry fallout that led to the bailout plan being enacted.
Overall this is good news for the economy and the financial crisis in general. Lower rates will allow more people to refinance their existing loans into more affordable monthly payments. Perhaps those lucky enough to have some equity in their home will even cash out and spend some money for the holiday season. All signs point to a rough consumer spending cycle this final quarter but we try to remain hopeful :).
Interest rates coming into line was definatly the first ingredient in the recovery of this economy. Now the Government heads into the next ingredient which is staving off the foreclosures. They will do this through several means which we will spell out in our next article later this week. We will explain in detail how the Feds will help homeowners stay in their homes and how this will benefit the economy as a whole.
Thank you for staying tuned and we hope some of you are able to benefit by the new lower rates available to you!