Time for Deej to refinance...the only question is when?
I've decided to tap the infinite wisdom of the CAPS community to take an informal poll to see when the best time to refinance my 6%+ mortgage into a 30-year-fixed zero point sub-six-percent mortgage will be. I strongly believe that the time to do so is at some point in 2008. The Fed has dramatically cut interest rates over the past year, but the problem is that banks have lost their appetite for risk resulting the lack of a corresponding move in mortgage rates. I think that the Fed has got to be fairly close to being done cutting rates. If I had to make an educated guess, I would say that they have another 50 basis points in cuts left in them for the rest of 2008, two 25 basis point moves.
At some point, the Fed will likely begin to aggressively tighten rates again when they realize that inflation is out of control, or at least when they can no longer credibly deny it. So I'm aiming for a window between now and when the tightening cycle begins. I suspect that the credit markets have to loosen up at least a little bit at some point in the coming months. I'd be happy with a 30-year fixed, zero point rate of 5.5%. Of note, my credit is in great shape. According to bankrate.com the average 30-year fixed rate is currently 5.83%. Below is a great chart showing the history of rates over the past decade with an insert that blows up the last couple of months.
So what doth the community say? Will mortgage rates come down? If so, when? What rate should I shoot for? When are we likely to see it?
Normally this would be an interesting discussion because if one has a good idea of where mortgage rates are going to go they can apply that knowledge to the stock market. Lower rates mean that housing will be more affordable, giving a lift to prices and possibly helping consumer spending. Of course, if my "window" theory is right and rates will drop slightly, only to rise rapidly shortly thereafter then I don't see much of a practical application for the data, at least in playing stocks on the long side.
Looking for a new mortgage