The Fed announced yesterday that they will buy up an additional $750 Billion in mortgage-backed securities, as well as $300 Billion in Treasuries or government bonds. The debt markets responded positively and within hours of the announcement, interest rates dropped a quarter percent.
This will not only spark another refinance boom, but it will also result in a huge influx of dollars into our economy which should spur more lending overall. The downside is that the potential increase in the number of dollars has already caused the value of the dollar to fall against other currencies, and this will result in inflation which could, in turn, drive rates back up. So, our point is to take advantage of these rates before they go back up.
How low will a payment be with a 4.5% interest rate? For every $10,000 borrowed, the payment will increase by $51. Hence, a $250,000 loan will have a 25 x $51 payment of approximately $1,275. This is off by a little because of rounding, but this is a handy tool to help your clients estimate their overall payments.
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