Orlando Real Estate Voice

A recent survey and a rate increase could mean more competition for homes

Recent indication is that first time home buyers are getting tired of sitting on the sidelines. According to a recent online poll taken by the National Apartment Association, 17 percent of renters plan to make the jump to home ownership in the next year; 41 percent of the 2,041 respondents planned to be home owners within two years. Only 31 percent planned to still be paying rent five years from now.

Another factor that could very soon contribute to an increase in home buying could be rising mortgage costs. Fixed-rate mortgage rates rose to 6.32 percent, the highest it has been since October. After months of aggressively dropping interest rates, many lenders are worried that the Fed will be forced to raise rates back up. As interest rates rise, so do mortgage rates. According to a press release on freddiemac.com, Frank Nothaft, Freddie Mac vice president and chief economist said that, “Mortgage rates jumped this week after a number of Federal Reserve officials, most notably Chairman [Ben] Bernanke and Vice Chair [Donald] Kohn, expressed concern over a threat of inflation.” We may very well be seeing the beginning of the end of the super-low mortgage and potential buyers may realize that with rising rates, now may be the time to jump in. Nothaft added, “Moreover, pending home sales for April unexpectedly rose by 6.3% and mortgage applications for home purchases … were also up last week.”

Jerry Interest Rates Interest Rates, Orlando Fl. Real Estate, Orlando Homes For Sale, Windermere Fl real estate, Winter Garden Fl. Real estate

There is a growing sense that the worst of the credit crunch may be behind us. And despite a tamer-than-expected reading for April, inflation is still very much a concern for many Americans.

So with that in mind, could the Federal Reserve be forced to raise interest rates before the end of the year….even in the midst of the presidential race?

The Fed has historically been reluctant to make significant policy moves in the months leading up to the election.

The market now seems to think that Fed chair Ben Bernanke may take action just a few days before Election Day on Nov. 4.

According to futures listed on the Chicago Board of Trade, investors are currently pricing in a 56% chance that the Fed will raise its benchmark federal funds rate by a quarter of a point, to 2.25%, at the conclusion of a two-day meeting on Oct. 29. Traders widely expect the Fed to keep rates at 2% at meetings in June, August and September.

There have been calls for the Fed to, at the very least, leave rates alone for the foreseeable future. Critics of the Fed have maintained that a relatively low federal funds rate, an overnight bank lending rate that affects how much interest many consumers and businesses pay on loans, has weakened the dollar and helped fuel the boom in commodity prices.

What do you Think?

Jerry Interest Rates Interest Rates, Orlando Fl. Real Estate, Orlando Homes For Sale, Windermere Fl real estate, Winter Garden Fl. Real estate

Fed steps in and cuts again
Bernanke pulls out all the stops to ailing economyThe Federal Reserve significantly cut rates for the sixth straight time since September, this time cutting 75 basis points. This follows a busy weekend where the Fed also extended its hand to Wall Street, bailing out Bear Stearns with JP Morgan Chase. While rate cuts look good at face value, you need to prepare for what’s to come.

Why did they do this?
The Fed wants you to start spending money and wants to boost consumer and Wall Street confidence. Consumers are under stress with increasing consumer prices and a slowing housing market. Wall Street banks have been under stress from mortgage defaults and their impact on corporate balance sheets.

How does this impact you?
Fed rate cuts are inflationary. Since the Fed started cutting rates in September of last year, oil prices are up nearly 40%, gold prices are up over 25%. This is the direct result of a falling dollar which occurs from Fed rate cuts.

As a result, mortgage rates will ultimately rise from here. It is inevitable. Inflation is the arch enemy of fixed-income investments, long-term bonds and mortgage-backed securities, upon which mortgage rates are based.

Here’s a look at the inflation picture: Gas prices last September, prior to the Fed’s current cutting trend, were roughly $2.75 a gallon. Today, gasoline averages $3.25 a gallon nationally, up 18% before the first rate cut. This is a sign of inflation.

What should you do now?
If you are looking to refinance, don’t wait. Act now to get a great interest rate. Home loan rates have come down over 1.00% in the last two weeks. But after each of the last five rate cuts, we have seen rates rise significantly in a short period of time. Don’t get caught saying “I wish I had…”

If you are looking to purchase a home, I want to hear from you right away. Home prices have to fall over 10% to make back what you lose in monthly housing payments if rates increase 1.00%. There are some great buys out there today!

Next step
Pick up the phone and call me. 407-580-7011 You owe it to yourself. I will review your situation and let you know what I can do to put some money in your pocket. If you wait, it could cost you thousands of dollars. I look forward to hearing from you. YES IT”S TIME TO BUY…..NOW!

Jerry Interest Rates Avalon Park Fl., Central Florida Homes for sale, East Orlando Real Estate, Interest Rates, Luxury Homes in Windermere Fl., Orlando Fl. Real Estate, Orlando Homes For Sale, Waterford Chase Florida, Waterford Lakes Fl., Windermere Fl real estate, Winter Garden Fl. Real estate

The Fed expects banks to reduce the interest they charge their customers.

Q: Why did the Federal Reserve lower interest rates?A: The federal funds rate is the interest that banks charge one another for overnight loans. When the Fed raises its target for that rate — the rate itself is actually set each day by the open market — it tends to slow the economy, because everyone’s money costs more to borrow. When the Fed lowers its target rate, it has the opposite effect. So by cutting the cost of the money banks borrow from each other, the Fed expects the banks to reduce the interest they charge their customers, who in turn can spend or invest the savings, which should stimulate the economy.Q: Will the rate cut lower the cost of a mortgage?

The interest on fixed-rate mortgages is tied to long-term financial instruments, and the federal funds rate is applied to overnight loans between banks — about as short-term as you can get. So Tuesday’s drop in the fed funds rate is unlikely to affect those kind of mortgages anytime soon. But adjustable-rate mortgages are generally tied to shorter-term interest rates, such as the one-year Treasury bill. So if you’re currently making payments on an adjustable-rate loan and it’s coming up for its periodic adjustment, or “reset,” the rate should fall and your monthly payments should shrink.Q: Will credit-card interest rates fall?A: Although the interest consumers pay on credit-card balances and most other revolving debt isn’t tied directly to the federal funds rate, there is an indirect effect when that key rate changes. So credit-card balances, auto loans and other unsecured loan rates could fall somewhat. Credit cards with variable interest rates are tied to banks’ “prime rate” — what they charge their best commercial-loan customers — and that rate generally moves in tandem with the Fed’s target for the federal funds rate. So if you’re using such a card, the annual percentage rate you pay on any balance is likely to shrink. But remember: Your credit score remains a significant factor in determining your card’s APR, so the extent to which a cardholder might benefit from the Fed’s action will vary from person to person.

Jerry Interest Rates Interest Rates, Luxury homes, Orlando Fl. Real Estate, Orlando short sale expert & Specialist, Windermere & Winter Garden Fl. real estate