With the news in September, 2013, that the Fed will not be tapering back its bond buying program any time soon, mortgage interest rates dipped again for the 3rd time in as many weeks to 4.22%.  The interest rate for a 1-year adjustable rate mortgage is now 2.63% while the interest rate for a 5-year adjustable rate mortgage dropped from 3.03% to 3.07%.

With the government shutdown underway, lenders and the stock market are watching to see how long the shutdown will last and how this will affect interest rates.  The longer the shutdown lasts, the worse the US economy will be.  However, in a twist of fate, this is good news for the real estate industry.  When the economy is performing sluggishly, interest rates drop to stimulate the economy.  So, lower interest rates, while good for new home buyers, can be a sign of a weak economy and lower consumer confidence.

Another factor of the government shutdown is the potential default on the raising of the $16.7 trillion dollar debt ceiling.  The opposite effect would be true in this case.  If the government defaults on its debts, the effect would be a domino effect on all of the world’s economies causing interest rates to skyrocket.  Lenders, in the mean time, are on hold as the government sorts through its financial and political issues.  Requests for income verification for borrowers are going “into the pile” as the IRS is closed until further notice.  Approvals for FHA loans are also experiencing a delay as those offices are also out of commission until the end of the shutdown.

However, the drop in interest rates to 4.22% came in a steady decline over a period of almost a month, so this trend is not a result of the government shutdown.  However, economists predict that this downward trend will soon level off and sustain itself (barring any complications from the shutdown) over the next few months.  Another review of the economy by the Fed will happen in the 1st 2 quarters of next year to decide yet again as to the fate of the bond buying program.

If you are a home buyer looking to purchase a new home, interest rates are still at incredibly “low lows” giving you as the home buyer more buying power.  You can get more “bang for you buck” – a higher priced loan at an affordable monthly payment, and you can find new and custom home by Ron Lee Homes right here in St. Tammany Parish. Contact Ron Lee Homes Today at 985-626-7619 or E-mail Info@RonLeeHomes.com For More Information.

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