2008/12/Fixed Mortgage Rates

So I guess my idea to freeze interest rates wasn’t so crazy after all.

According to the Wall Street Journal, “The Treasury Department is considering a plan to boost the depressed housing market by easing mortgage rates on new home loans. The plan, which is in the development stages, would bring loan rates down as low as 4.5%, a full percentage point lower than the prevailing rates for 30-year fixed mortgages.”

By lowering rates to 4.50% this will make housing more affordable for potential home buyers, but will it increase demand? Mortgage rates are already close to historic lows and that hasn’t seemed to help. I think in order for this plan to work they need to allow existing home buyers to refinance at that rate as well. The government has taken a trickle down effect (gave money to financial institutions) when all along they should have taken a trickle up effect (give money to the taxpayers, like the last 3 or 5 years in federal income taxes), meaning in order for you to access the funds the government injected into the economy, you must borrow it. So by offering the reduced rate of 4.50% to everyone you are in essence allowing every homeowner the opportunity to access those funds thus creating a stimulus for every homeowner.

Here are some examples of how much you would save by refinancing at 4.50%:

Current mortgage amount of $250,000 at 6.00% would save about $250/mo.
Current mortgage amount of $350,000 at 6.00% would save about $250/mo.
Current mortgage amount of $250,000 at 6.50% would save about $300/mo.
Current mortgage amount of $350,000 at 6.50% would save about $425/mo.

If you have any questions about how this potentially could impact you, please send your questions to info@illinoisrealestate.com