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INTEREST RATES HIT NEW LOW - Is It Time To Refinance Again? 2010-08-08
INTEREST RATES HIT NEW LOW
Is It Time To Refinance Again?

The top story of the week is once again low, low interest rates. Today's thirty year fixed rate at 4.25 percent (or maybe a speck lower) is the lowest we have seen in over thirty years.

The first house we bought after getting married was in 1978, and I was able to assume a mortgage held by Tucker Federal, now absorbed by something else.  At that time, rates were in the 8 percent range, and we thought we were getting a bargain taking over payments in the high sevens. I had to meet with a VP at the bank and explain that even though I was looking for a job, my father had agreed to back me up on this loan. (This was sufficient for the lender.)

After that, rates started climbing to dizzying heights. When I began selling homes for Barton & Ludwig (also now absorbed), rates were in the high teens, and we pushed "negative amortization" loans in which the payments don't even cover the interest expense for the first five years. At the time, that was considered acceptable because inflation was pushing home prices up as much as 20 percent a year.

In a few more years, inflation was seemingly tamed, and rates for home loans began their painfully slow descent.

I specifically remember telling my wife that if we could ever refinance below 12 percent interest, I would be happy forever. We did. I wasn't.

Each time the rate dropped another two points, I was certain we were seeing the bottom. We weren't.

In fact, as recently as earlier this year, I confidently predicted that long term interest rates would rise this summer. It was in response to our excessive government spending, our gloomy economic outlook, and the impending withdrawal of Chinese support for our dollar.

Fortunately for all of us, I failed to take into account the lunacy of the average European worker, who gets much more in vacation benefits that the comparable US worker, and is willing to go on strike to demand more. The so-called PIIGS of Europe (Portugal, Ireland, Italy, Greece and Spain) are driving the EU toward bankruptcy. And there is even less confidence in the Euro than there is in the dollar.

At the risk of crying "wolf" one too many times, this situation can't last for long. But while it does, you have a remarkable opportunity to lock in a rate on your home loan at well below 5 percent. My advice, for what it's worth, is to refinance immediately, lock in as much debt as you can afford at this historically low rate.

Then take pride in the fact that you have truly beat the system. More tips on refinancing at money99.com.
 
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