The real estate world has been sent completely on its ear this year, with bailouts, credit problems, foreclosures and more. What can we imagine will happen? Is there any way to know if the rates will continue to go down?

With credit conditions so tight and so many foreclosures casting a pall over the mortgage industry, one would think that those candidates for home loans with good credit histories would be able to name their rate when it comes to a mortgage. However, the banks are doing the reverse, and raising rates in an attempt to build revenue.

Under other circumstances, this would seem like a bad choice since the usual route to increased earnings is to lower prices. Matters in the banking industry are far from normal, right now, and credit card companies are also using this strategy of higher rates to boost revenue in this tight market.

In the good old days, a slowdown in the economy would usually mean a lowering of interest rates since banks would try to attract more customers with attractive rates. Today, though, the financial industry is so disrupted that matters was considered normal before are not now.

What does all of this mean for someone who needs to decide if this is the best time to borrow for a home? Take a wait and see approach and hope that matters will return to normal, with lower interest rates, or take advantage of any credit that can be obtained, no matter what the rate?

Not only is there currently a recession, there are many who even believe there is a depression coming, which will surely lead to deflation. Normally, deflation will in turn lead to lower interest rates, so this indicates a wait and see attitude is the best to take at this point.

There are banks who are still granting mortgages. There are quite a few small lenders that never got caught up in the credit problems like the larger banks. This was because a lot of them were too small to enter this highflying arena of subprime loans.

There is another good reason for waiting to buy right now and that is because housing prices probably still have a way to come down. A study of housing prices conducted by researcher Case-Schiller shows an average decrease of 17%, but some areas with home prices falling 25%. The scene seems to be set not only for lower interest rates, but lower housing prices as well, with the wise homeowner putting off his plans until the entire mess is sorted out!

This entry was posted on Tuesday, December 15th, 2009 at 10:41 pm and is filed under Mortgage Loan Rates. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.