Mortgage Rates and the Falling Dollar

As of Monday, November 22, 2004, mortgage rates are steadily declining. From the end of last week to the beginning of this one, the rate has dropped from 4.20 percent to 4.19.
This may not sound like a lot but this was over just one weekend period. The Fannie Mae and Freddie Mac index also shows a change in the net yields required now compared to a few weeks ago. The results of the FM’s are in direct correlation to the price of mortgage money, meaning investors will not be likely to invest.

The budget deficit is definitely having a threatening influence on Wall Street. Alan Greenspan, chairman of the Federal Reserve, recently made a statement that the value of a dollar will continue to fall in relation to other currencies. This means that it will be more expensive for Americans to travel abroad. It also means American exports will be cheaper in other countries, while imports from those countries will be more costly to us. Not only does this mean our standard of living will worsen, but foreign investors will become disenchanted.

Investors should not jump to conclusions and start worrying too soon. As is per usual, the economy changes and the market changes along with it. Nothing is ever for sure, and no matter how bad it gets, it is bound to change (unfortunately this is the same when the market is good).

For you, the consumer, a decrease in mortgage rates is good! You will be able to purchase that home you have been wanting with a much lower interest rate than before. Although it may rise again in the near future, a fixed-rate mortgage can guarantee you the same interest rate for the entire loan and you will benefit from the rate drop even if the economy does not.