I WANT MY 4.5% !!!!!!!

Last week, a report was irresponsibly leaked to the press that the Federal Resrve was considering a plan whereby they would purchase mortgage backed securities from Fannie Mae and Freddie Mac with the intention to drive interest rates on conforming loans (loans less than $417,000) down to 4.5%. There were no details released on the speculated plan, with no information given as to who who would qualify for the mortgages to be issued. There also was no confirmation of how this plan would differ from previously announced plans by the Fed to purchase securities from Fannie Mae and Freddie Mac that have lowered interest rates on conforming loans to the 5.25% range (loans from $417,000 to $625,500 are generally a quarter of a point higher).

For those borrowers who now feel that they should wait a while to see if interest rates will go down that low, I have one piece of advice, “Pigs get fat, but hogs get slaughtered”.

Rates thru mid-2008

Interest rates are now at the lowest rates in over 30 years, and there is no basis at all in expecting interest rates to go significantly lower If you can qualify for a conforming mortgage today, I would advise you to jump at it.

What the Federal Reserve really needs to address, however, is the difficulty that borrowers have in obtaining a loan in excess of the “super conforming loan” limit of $625,500 (so called “Jumbo Loans”) . These loans are generally only available for a fixed term of 5 to 7 years, and are currently at a rate of approx. 6.25%, a full one percentage point above conforming loan rates. Before the fiscal crisis hit this summer, the spread between the two was a low as a quarter of a point.

For more information about buying or selling a home in the South Bay beach communities and the Palos Verdes Peninsula, visit my website at https://www.maureenmegowan.com