Friday, February 29, 2008

Why Buy a Home or Property Now?

Interest rates on long-term, fixed, and adjustable mortgages are at historically low levels. The Fed started cutting interest rates to bolster the economy in September, and recently has turned more aggressive. During eight days in January, the Fed slashed rates by 1.25 percentage points, the biggest single-month reduction in a 25 years. Since September, the Fed has cut its federal funds rate - what banks charge each other on overnight loans - by 2.25 percentage points to 3 percent. It also cut its discount rate on direct loans it makes to banks by 1.75 points to 3.5 percent. Rates are expected to move lower at the Fed's next meeting on March 18. Despite this, mortgage rates are starting to creep up. Consumers should lock in low rates now, before they go higher. With more homes on the market for longer periods of time, buyers have more choices when it comes to selection. The foreclosure crisis has motivated the government to create more consumer protections against predatory lenders than previously existed. A temporary increase in the conforming loan limit means consumers should soon be able to borrow at lower interest rates for higher-priced homes. Prior to the increase, the conforming loan limit was $417,000. The spread on interest rates between jumbo, or non-conforming mortgage loans and conforming is about 1.2 percentage points.
Posted by Harrison K. Long, Explore Properties Group, Feb. 29, 2008
[source: California Association of Realtors]



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