Friday, November 23, 2007

Mortgage Interest Rates At 6-month Low

Freddie Mac’s weekly survey of interest rates shows the 30-year mortgage dropped from 6.24% to 6.20% for this week, the lowest since mid-May. The low for this year was 6.14% in early March, and rates kept climbing pretty steadily for a while, reaching 6.73% back in July. This made many analysts think that interest on 30-year fixed home loans is about to go through the roof topping 7% by the end of the year. Turns out they didn’t foresee the August credit crunch and well, no one counted in the Fed rate cuts. I assume now it’s safe to say interest rates won’t be nearing 7% until the end of the year in any case. With all the mess in the housing market and the two GSEs in trouble as well, the Fed may yet cut again at its meeting on December 11th – they’ve thrown the dollar stability out the window anyway, so why not prop up the Real Estate sector for a while. Furthermore, oil will most likely hit $100/barrel by the end of 2007, rate cut or not (it’s at $97-$98 right now and forecasters say it will keep growing) due mostly to the dollar’s weakness: China plans to “diversify” its reserves, and OPEC is considering pricing oil in another currency. It may all look like doom & gloom but this is reality. Financial innovation, anyone?

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