Are the mortgage rates going to go down the weeks after Feb 23rd?
Recent news about the drop in the Prime Rate from 7.25% to 6.0% has produced widespread speculation about mortgage rates dropping to new all-time lows. Our CFO, Junius Lim, recently held a company meeting to address this concern. Here’s an excerpt from the meeting: Nick (Loan Officer): ” Junius, if Prime recently dropped a point and a quarter, why are mortgage rates increasing ?” Junius: “The main benefit from lowered Fed rates will be seen mostly in short term loans like credit cards and car loans. Remember that mortgage rates are different because they are driven mostly by investors who have recently seen and will continue to see high default rates from loans purchased in the sub-prime debacle.” Nick: “But why isn’t the market doing what it did in 2003, when rates plummeted to the low fives?” Junius: “Good question. In 2003, we were in the middle of an appreciating market where first time buyers were flooding the market and existing homeowners were anxious to fix in low rates. It was
