Tuesday, August 3, 2010

HISTORICAL PERSPECTIVE ON MORTGAGE INTEREST RATES

Today's post is simple and to the point.  Interest rates are absurdly low.

When I first became licensed in the early 1990s, I started my real estate career in the mortgage business.  And my first job involved cold calling homeowners and offering to refi them at 8.75%, since rates below 9% were "historic" (at the time). 

If rates in the mid 4s don't do it for you, there's not much else I can say.

For comparative purposes, when VA loans were first authorized by Congress in 1944, servicemen were offered fixed rates of 4.0%.  Today's rates are barely a tick above what soldiers returning home from World War 2 were offered nearly 70 years ago.   

The risk of an upside spike is far greater than a continued decline, because we are already bordering on "free money".  Although I do believe that 10% unemployment is the new reality and the economy will remain sluggish for some time, the effects of a $2 trillion cash infusion into the economy will eventually manifest.  I do not believe you will see rates like this again in your lifetime.