Ascent Home Loans

Many potential borrowers have been hearing encouraging news lately in regards to the real estate market. In fact, today the numbers were released for construction spending and pending home sales showing an increase in both. Other economic indicators over the past weeks have been improving also. What does this all mean for the homeowner looking to refinance? All these improving numbers must be good for interest rates right? Not so.

If you are one of the many waiting for rates to decline even further, you may be missing out on your opportunity to refinance at the current historic lows. With each improving economic number that is released, there is a greater chance of rates starting to go up.

Remember, the whole reason rates are where they are today is simply the fact that the Federal Reserve and the Treasury are pumping billions, even trillions of dollars, into the economy to stabilize the free fall we were in. That infusion of money also included artificially lowering rates to their current levels. Once the government sees enough information that the economy is in fact stabilizing, that money being used to keep rates lower will stop being pumped into the system and rates will increase at a very rapid pace. Overnight borrowers may see rates jump 1 to 1 1/2 points back into the low to mid sixes. Also, if the Feds even sense  that inflation is beginning to creep into the economy, they will tighten up on the Feds Fund rate even further, driving interest rates even higher.

Think this just might be hype? Even Treasury Secretary Geithner stated in front of the Oversight Committee that the process of the government buying mortgage backed securities will be coming to end sooner than later.  Even Fed Chairman Bernake stated last week during testimony in front of the Joint Economic Committee  as the economy continues to stabilize, he sees no problem with raising the Feds Funds rate to 2% to 2.5%.

The time is coming when those who waited for rates to fall even further and sat on the sidelines, just might be watching the train slowly leave the station leaving them behind.