Latest Rate Prediction - How You Are Imperilled By The Problem September 8, 2008
Posted by janey in : financial success , comments closedThe banking system in the USA is in crisis. The Fed keeps lowering Federal interest rates, but mortgage interest rate predictions are still going up - how can this happen? And what might it mean for home owners today?
The relationship home owners need to grasp to understand interest rate predictions is the interplay between interest rates set by the Fed and mortgage interest rates charged by mortgage lenders.
Interest rates that are set by the Fed flow into the cost of funds to mortgage lenders. Banks and other lenders don’t possess all the funds they lend out when a mortgage is written - they borrow on the wholesale market 90% or more of what they lend out to home owners, at interest rates lower than the mortgage rates they charge home owners for their mortgages.
Banks make their profits from the difference between what they pay when they borrow money, and what they charge when they lend it out.
When the Federal Reserve lowers interest rates, it lowers the borrowing costs for financial institutions, so you would think that mortgage interest rate predictions would fall. However, financial institutions may choose not to pass on the savings to mortgage holders.
The reason for this is not greed - there is adequate competition in the mortgage lending market to ensure that no bank or other lender can profit unfairly. The real motivation is that being a bank that lends for mortgages just became a whole lot more risky, and risk tends to make banks raise interest rates.
Financial institutions are everyone more interest to compensate for their losses on the few who will miss payments on their mortgages.Until the current housing market settles, risks for lenders will remain elevated, and mortgage rate predictions will continue to be high.
The Fed can’t lower interest rates indefinitely. The actual interest rate (called the “nominal” rate) includes inflation. To find the “real” interest rate, you need to subtract the inflation rate from the nominal interest rate.
Today, when you do that, you get a negative number! This means that nominal interest rates are not even high enough to keep up with inflation.
Clearly, this is a situation that cannot continue for long. Sooner or later, probably sooner, the Fed will have to raise interest rates to at least break-even levels, matching the rate of inflation. As soon as it happens, the prime interest rate rise will flow through into mortgage interest rates. The only way is up for the home mortgage rate forecast.
Three More Of The Best Blogs I Wish I Had Read Years Ago September 2, 2008
Posted by janey in : financial success , comments closedWhere are all the money blogs? Someone should start a blog about money, we need more of them. Just joking, of course - there are hundreds, thousands of money blogs out there. Blogs about saving money, blogs about making money - thousands of blogs about the single topic of making money online alone, without considering the rest of the financial world! Nobody could possibly follow all of them. So, which money blogs are worth reading?
There is no way to read every blog about money. In fact, I doubt there is any way even to count them all. The best one can do is sample them. As part of my non-comprehensive random-walk survey of money blogs online, may I present a small selection of the results for your delectation. I have avoided the obvious mega-blogs powered by media and other vested interests - who wants to read more of that rubbish? Read them at your peril. But apart from that, this selection ranges from the tiny and specific to the eclectic and very amusing. Enjoy.
Worth a look is this blog about pretty much all personal finance topics - interest rates predictions, debt consolidation, refinancing, investing, reducing expenses, reducing monthly payments, vehicle refinancing, and wealth creation. The occasional post might be too specific to be of interest to a broad market, but most posts will be at least mildly interesting to the average reader, and there is an occasional gem as well. Make sure you check the archives, because you can find timeless material that is quite useful hidden in the depths.
It’s particularly good on strategy, and thinking about your overall financial situation. Any individual tactic is just a piece of the puzzle, and without a co-ordinated financial plan you cannot possibly get the best benefit out of any given tactic.
Now, I hesitate to blow the horn too strongly on this little gem, because its early days yet, but I really like the style and variety of the posts about financial advice, personal finances, mortgage advice, financial news, investment advice, financial advice, mortgage rates predictions, financial planning, debt reduction, and how to be debt free on this blog, and I am looking forward to reading more. Intelligence is a rare commodity online, where writers have become utterly divorced from editors, and virtually all publishing is vanity publishing.
Here’s a another blog covering a range of financial topics including financial advice, personal finances, mortgage advice, financial news, credit cards, debt consolidation, refinancing advice, investment and wealth building. It’s pretty new, so we shall see how it develops, but the start is promising. This blog has the potential to be not only intelligent, but amusing and entertaining at the same time.
In general, I would recommend keeping an eye on the blog at moneytalksabout.com/blog. This blog pulls together RSS feeds from several other good quality money blogs, which saves time and effort in surfing around the internet to each blog, and the posts which are made directly to the Money Talks blog itself, in between the syndicated posts, are always good value.
This is hardly the be-all and end-all of money blogs. New money blogs come into existence every day, and there will be hundreds of undiscovered gems available elsewhere. Feel free to add a comment with the URL of your favorites, and why you like them. We can all help one another to sort the wheat from the chaff, and together we can pinpoint the best money blogs to be reading today.
