St. Louis Mortgage News - What Was I Thinking

What was I thinking? by Chris Scheer, Cornerstone Mortgage, O’Fallon, MO

The wonderful thing about interest rates is that you never can truly predict what direction they are heading in.  For those of you that read my last post about rates going down, you at this point think I am a complete fool!  At some level you might be right; however the same pressures that existed when I wrote that article are still there.  They just have had some short term relief and the usual unpredictable influences that occur from time to time affect them.  Let’s talk about where we were, where we went and where we are now?

Two weeks ago today our 30 year fixed on a conventional loan was about 6.75%.  It was then that I started the article on rates dropping.  Throughout that week the rates started to fall, so much that on Friday morning of that week I locked in a purchase at 6.125% on a 30 year loan.  Around 1:00 that day it was announced that the Fed was stepping in and taking over Indy Mac bank. At that point our rates jumped up to 6.375%. 

The following Monday the market remained calm, and rates did not move.  Then on Tuesday oil prices started to drop and over the next two days oil fell over $10 a barrel.  All of a sudden Wall Street showed improvement in stock prices and the 6 week slide was halted.  That meant that money was flowing back into stocks and out of bonds.  Remember your economic lessons of previous posts, when the demand goes down the price goes down.  On bonds when the price goes down the yield (interest rate) goes up.  So by Friday of last week we were back to 6.75% on a 30 year loan. 

As we start the week, we have oil starting to climb again and one of our two Presidential Candidates trying to move troops to Afghanistan to fight the War on Terror.  As long as we are fighting Wars, we are going to have challenges controlling our markets.  These wars are costing us BILLIONS and we are paying for that with borrowed money.  Sooner or later that will have a negative effect on our economy and we will see rates come down.

For questions or comments about this please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, St.+Louis+Mortgage+News, Indy+Mac

This entry was posted on Wednesday, July 23rd, 2008 at 7:00 pm and is filed under For Buyers, Mortgage News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.