Will mortgage rates go even lower?

At the time of this writing, the Dow Jones Industrial Average was right around 14,000, which is just under the all-time high that was hit in October 2007. Gas prices have come up 42 cents in the past month and we are also dealing with higher payroll taxes which are taking more money out of our disposable income.

The “sequester” which will amount to $85 billion in automatic spending cuts by the government, are set to go into effect on March 1. The hype is if this is not amended, we could see negative growth and thousands of jobs loss as a result. At the time of this writing ,European woes have been significant, which have also been a very big concern here for the U.S.

The forth quarter GDP, which is a total of all monies spent in the U.S. came in at a meager -0.1. Usually this would really scare the markets, but the media spun this off as result of Superstorm Sandy, which hit the East Coast. They failed to mention that the fourth quarter is when most consumers usually overspend on the holidays only to feel the pain for months to come. I would have thought that the consumer spending would have had a better impact on GDP. A second consecutive quarter of negative growth would be the textbook definition of a recession.

Also, Wal-Mart and McDonalds, which are always interesting barometers of what the everyday consumer are doing, have seen weaker sales.

Stronger economic news will bring rates up, and weaker economic news will bring rates down. If we are in fact in the midst of a perfect economic storm, mortgage rates could drop to historic lows. You might ask, “Ron, are we not at historic levels with rates being the mid 3s for a 30-year and the high 2s for a 15-year?” We are, but if growth begins to slow and we see a correction in the stock market because of that, it is very possible that we could see the 30-year rate in the high 2s and the 15-year rates in the low 2s. Imagine a 30-year fixed rate at 2.875%!!!!

Let’s not forget that the Fed is buying $85 billion a month of bonds, which is also helping to push and keep rates down.

We are by all means in uncharted territory. If you are currently refinancing, please continue to move forward in doing so. The worst thing that can happen is that if rates go down after your close, is that you do it again.

For more, call 773-557-1000 ext. 15, e-mail ron@ronmortgage.com or visit www.ronmortgage.com.