Dont Miss Lowest Interest Rates in Two Generations!

Our friend, Tim Palacios, at Opes Advisors writes in an email economic update today,

“The Tale of 2010 will be depend upon the Federal Reserve Actions, period!  Interest rates will determine how this year goes for mortgages, homeowners and equity markets.  And those specific fed actions and how the marketplace reacts to those actions, are very, very hard to anticipate. 

In all of previous cycles we’ve experienced in this business, when there is a major shift in federal reserve interest rate policy, it is always more abrupt than I ever anticipate and it always catches me and everyone else off guard, even when we know it is coming…. 

As we all know, the feds will stop buying mortgages this year and the private sector must step in.  This probably means (with some volatility) that rates will go up by 1 to 1.25% over the year.  We have already seen an increase since Thanksgiving week of around 25 bps.  The severity of this will depend on the whether we reach stabilization of housing values…

The FOMC will NOT raise short term interest rates for the year, however, will probably have to change their language in their comments.  Our gut feeling is that the moment the Fed changes any one of its words, it’s going to be a very unpleasant experience, because the marketplace has very little patience and a very big imagination. ”

If you haven’t already, Tim recommends that you refi to today’s attractive rates as soon as possible.