Practical Thinking for the New Mortgage Rate Environment

January 7, 2011


Think a Bit About Mortgage Rates In Context, and All Will Be Less Gloomy

Think a Bit About Mortgage Rates In Context, and All Will Be Less Gloomy

If you have not been considering a real estate transaction recently, this may come as news to you, but the price for mortgages is on the rise. The question, however, most often posed by borrowers in these volatile times is whether the salad days of the sub-4.5% mortgage rates are well behind us.

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The answer is one that, in general, disappoints. With the economy on the mend and treasuries losing their luster, conventional wisdom is that we have begun the rise to a more normal rate environment. All signs are pointing to 5% or higher for Fannie Mae and Freddie Mac loans becoming the new near-term reality. We could see even higher rates toward the end of the year. So what is a borrower to do?

To begin with, partake in any grieving that you need to do and move on. A real estate transaction occurs at a given point in time. Everything from the price or value of the property to the mortgage rate is a function of the time in which the transaction takes place. In short, it does not matter what rates were in October of last year and to lament is a waste of time. What matters is the rate available today and whether that rate meets your overall objectives.

Now that you have accepted that rates are what they are, take a minute to actually look at rates from a historical perspective. Rates in the 5% range are still amazingly low if you evaluate them in the context of the past decades. Understanding this and the fact that rates will likely return to a level more in line with the historical average should dispel some of the angst over not hitting the bottom. Just being at the low end of the trough should be enough to be thankful for.

Finally, remember the reason that rates are increasing is because equities have become a more favorable place for investors to out their money. This is an indicator of a stronger economy. If you have seen the double digit depreciation to your investments during the Great Recession, you should be jumping up and clicking your heels together with joy as these assets regain their value. Remember you cannot have it both ways and some money in your pocket due to the appreciation of equities that you hold could dwarf the benefit of a lower mortgage rate.

We would like to thank Sean Dreilinger for kindly sharing today’s photo via the creative commons license.
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About Doug Katz

As the Senior Mortgage Banker and Sales Manager for Chicago Bancorp, Doug not only originates loans for his personal business, but also oversees affiliations with banks and other financial institutions that depend on Chicago Bancorp to meet their client’s lending needs. In this role, Doug directs the day-to-day mortgage sales operations of over 25 branches in a multitude of Chicagoland’s diverse communities. He brings to these relationships a wealth of industry experience and a dedication to an exceptional client experience that has established Chicago Bancorp as Chicago’s pre-eminent mortgage solution providers. Prior to joining Chicago Bancorp, Doug attended and graduated from West Point. Upon graduation, he was commissioned as an officer in the United States Army Artillery, where served 5 years in numerous roles and in various deployments include service in Kuwait. In addition to his Bachelor’s Degree from West Point, Doug holds an M.B.A. from Loyola University Chicago, where he was also inducted into the Beta Gamma Sigma Honor Society. He also served as President for the West Point Society of Chicago from 2003 to 2005 and still serves on the Board of Directors. When not working, he spends his time with his wife and three children in their hometown of Oak Park, as well as pursuing his passions for fitness, cooking and the banjo. Doug can be reached by phone at 312.738.6079, by email at, on his own blogs, and Vet Money Matters. He's also on LinkedIn.

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  1. Practical Thinking for the New Mortgage Rate Environment « vetmoneymatters - January 7, 2011

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