Good News on Interest Rates

One of the “perks” of being in a recession is usually downward pressure on interest rates. An economic slowdown reduces the demand for capital, and usually leads to lower interest rates. And volatility in stock prices usually leads to more investment in money market instruments, thereby increasing the “supply” of money available to lend. Add to this the Federal Government’s campaign to add liquidity to the market through cuts in the Federal Funds rate, and it is no surprise that interest rates, including mortgage rates, have moved downward rather sharply. (click on graph to enlarge)

The longer this recession drags on, the more downward pressure you are likely to see on interest rates. However, just because rates are low does not mean it is easy to borrow money. Lenders have continued to tighten up on their requirements, and borrowers, especially in the jumbo category, need to have solid credit, ample assets, and oh yeah…a job.