Watch Mortgage Interest Rates to Refinance
REM #A824
By Ilyce R. Glink
Summary: A Think Glink reader asks which economic indicators he should monitor to know when to refinance his mortgage or home equity line of credit (HELOC). Ilyce advises monitoring mortgage interest rates as opposed to all the economic indicators that affect them because of recent events in the housing and financial markets. Learn how to watch mortgage interest rates.
Q: What economic indicators should I be watching when trying to decide when to refinance my mortgage or home equity line of credit?
A: I'd just watch the price of the mortgages themselves. Right now, we're waiting for interest rates to drop further. But interest rates have become rather volatile. For mortgage interest rates to drop the interest rate spread between what banks pay for funds and what you, as a homeowner, will pay the bank must narrow. (With so much uncertainty in the financial markets, the increased risk is being priced into the mortgages, which is why interest rates haven't dropped much.)
That's why mortgage interest rates dropped immediately by a third of a percentage point recently after the government took over Fannie Mae and Freddie Mac. (Interest rates rose again after a few days due to market conditions.)
While the government position in these companies took some risk out of the market and reassured investors that the government would stand behind those mortgages, home mortgage interest rates are still high relative to some of the interest rates they're supposedly tied to. Why? It's all about fear. Banks are afraid to lend to each other and they're afraid to lend to homeowners, and just about everyone else. The current credit crisis is really a crisis of confidence.
I'd watch for interest rates to go down, possibly before the U.S. Presidential election in November. You can track what various lenders in your area are charging for home mortgages by using the search feature in www.bankrate.com.
NOTE: Ilyce R. Glink's latest ebooks are "The Clutter Collector: How to Get Rid of Clutter Everywhere in Your Home" and "How to Save $50 a Month," which are available at her new, all-video website, www.expertrealestatetips.net. If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. You can also write to Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact her through her website, www.thinkglink.com. © 2008 by Ilyce R. Glink. Distributed by Tribune Media Services.
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