Ed's Blog

The FED has made some monumental interest rate cuts over the past few months. They’ve cut the FED Funds Rate 5 times, the Discount Rate 6 times, and there is speculation that the rates will be cut once again in just a matter of days. So why then, have interest rates on 30-year mortgages increased over the past month?

Unbeknownst to many, when the FED cuts rates, it sometimes has the opposite effect on the Bond market which drives mortgage rates. So, while rates for consumer debt have declined (credit card interest rates, car payments, etc.) fixed mortgage rates have risen over the last month.

I don’t think this is anything to worry about, though since this is not unusual and often fixed rates settle down again when this happens.

There is still great news, in spite of the spike in interest rates. The conforming loan limits were published last week, and the new conforming limits rose from $417K to

$729,500 in many counties in California (including San Francisco.) Areas that didn’t rise to the maximum limit still realized marked increases with some areas raising the limits to $580K, (such as Sacramento County.) This early publication of the new loan limits is great news, as it means that lenders will be ready to begin funding these loans in a matter of weeks.

Other good news? FHA increased its limits to match those of the conforming loan limits, and is offering incredible buyer incentives, including 3% down purchases on homes.

With home prices remaining low, an incredible selection of homes to purchase, the new higher loan limits, and the opportunities to buy and invest currently; don’t let the fluctuating rates deter you from purchasing a home. In our current economic environment, I believe rates will drop again before we know it. And in the meantime, new loan limits will still be in place through the end of 2008.

For information on the new conforming and FHA limits in your area, or to talk about current interest rates, give us a call at 415-406-3220 or email me at ecraine@smithcraine.com. I’ll be glad to explain all of the exciting opportunities presented today!