4.5% Mortgage Money
December 11th, 2008 by Mark FlandersEverybody loves a sale! It’s easy to get so caught up in the illusion of saving money that we either spend more than we should or we squander hours (and money) trying to find an even better deal.
About two weeks ago the Wall Street Journal announced, in a very short article, that the U.S. Government is considering a fixed 4.5% interest rate for mortgages in an effort to stimulate the economy. The article was very short; about 6 sentences. It quoted no sources and gave little information. But, boy did it cause a flurry in the newspapers and on the Internet. And ironically, almost immediately, activity in Mortgage Offices slowed down. The telephones got busier, but mortgage application activity slowed down noticeably. Why? Because everybody loves a sale!
Shortly after the WSJ article was published, the telephone started ringing. Clients wanted to know when they could sign up for the new 4.5% interest rate. All of the callers I spoke with were disappointed to find out that this program is not available. It may become available at some point in the future, nobody knows. It’s just an idea at this time, not a fact. Our Government might institute the idea, they might not. Almost every phone call ended the same way. “Well, I think I’ll wait to see when that new program starts and I’ll get my mortgage then”, or a variation of this comment.
It didn’t seem to matter that 5.125% was available that day. Nor did it matter that over the next week rates dipped slightly (they can’t dip much right now because they are already so low). Almost everybody had their sights set on 4.5% and nothing else would do. Many people, it seems, want to wait for the “maybe”. In the meanwhile, incredibly low, very attractive interest rates are being overlooked while an entire segment of the population waits for something better!
I can’t help but wonder how many hundreds of thousands of dollars will be lost to homeowners who are so focused on the 4.5% interest rate that they will ignore terrific interest rates already available. Will you be one of the people looking backwards thinking “What was I thinking? 5.25% was a great rate!”.
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![A classic Port Gamble "painted lady"](http://soundbiteblog.com/wp-content/gallery/port-gamble/port-gamble-013.jpg "A classic Port Gamble "painted lady"")
I’ve seen the same thing – just as people want to wait and wait for a 1/8 drop in rates, they also insist on waiting for home prices to go ‘just a little lower…..’ They insist on the PERFECT deal and overlook the VERY GOOD deal and we all know what that leads to – the ROTTEN deal.
Great article – and that picture made me ‘crack’ up!
Lola,
The Law of Unintended Consequences is alive and well in the real estate industry.
Like so many aspects of the financial quandry that we’re in, this little announcement had unanticipated consequences. No one thought about the fact that once the cat was out of the bag…folks might just decide to wait and thus make a difficult situation even worse.