Mortgage rate predictions for 2009 are all over the board and can be tricky. The current financial market is very crazy operation. The market is crazy not in the sense that they have no order like you would first think. What we mean by crazy operation is in the mathematical sense. The mathematical formulas that are used to predict the mortgage rate for 2009 have self-referential components.
Trying to predict the mortgage rate for any given year is impossible. Making mortgage rate predictions is like trying to guess the winning lottery numbers, impossible. If one does try to predict the mortgage rates for this year it will not be accurate, also the earlier one tries to predict these rates the larger the margin of error will be.
Although you can never predict the mortgage rate to a precise number it is predictable in broad terms. Lets look at an example like weather. Trying to predict what the weather going to be like on any given day is nearly impossible, however you can guesstimate. If you live in Chicago in December you can guess the weather will be cold and if you live in Florida in August you know it is OK to wear shorts. Thats how the mortgage predictions work, even though you can never get a precise number for the mortgage rate, the economy gives some kind of indicator of what it will be.

There are four different factors that cause mortgage predictions to increase. The first of these factors being the decrease in credit availability. The lenders that try to predict the mortgage rate work on supply and demand motto. In order to predict the mortgage rate they must recognize the increase or decrease in the supply and demand of money. If the supply is low the higher it will “sell” for because it will be given to those who are willing to pay for it. The demand works in the same way.
Inflation is also a factor for the increase of the mortgage rate. In order to receive the actual interest rate on a mortgage rate the rate of inflation must be taken into account. In order for the lenders like a bank to give you the average rate you must add the percentage rate of the inflation rate.
Another cause for the increase if government intervention. The government is the most powerful influence in the financial market. They can issue bonds at multiple interest rates and cause a domino affect influencing the “actual” interest rate. With the economy the way it has been recently the government has tried to do everything it their power, however in the long term it may not have done enough. The mortgage rate predictions of the year must take the governments involvement into account as well.
On top of the governments influence, the inflation, the decrease in credit availability there is always risk to take into account. Risk is a factor to the mortgage rate predictions as well. The mortgage lenders must realize the risk there is when lending money in the rough economic times. If the housing markets falls they are taking a lot more risk. Because the housing market has fallen all over America the lenders will more likely want to charge a higher interest rate.
Although making predictions for the mortgage rate for 2009 is never accurate it can be estimated. Make sure to take all of the above into consideration before agreeing to anything this year.

-M Petrone

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