Mortgage Rates of 0%


Inquiring minds are gazing into the future after reading an article by Marketwatch.com’s Amy Hoak. In “If mortgage rates plunged to zero” she asks ‘what if?’:

if rates continue to drop, as some in the mortgage industry suggest they may — especially after the Federal Reserve’s recent statement that it was prepared for more extraordinary measures to pump up the economy — mortgage rates could inch in the direction of 0%. Continued concerns of deflation may also put pressure on mortgage rates.

“So long as the Fed allows the word ‘deflation’ to get bandied about, mortgage rates will ease lower,” said Dan Green, loan officer with Waterstone Mortgage, in Cincinnati, in an email.

Where is the low?

“In theory, the only stopping point there is is 0% — that’s where all nominal interest rates have to stop,” said Mike Larson, real-estate analyst for Weiss Research.

Think about it: 0% financing has long worked as an incentive in the auto industry. And home builders have been known to pay down mortgage rates for their buyers, so these days it wouldn’t be unheard of for them to entice people with a 2% or 3% mortgage rate, at least for a period of time, Larson said.

It will be interesting to see this play out. The dye is cast. However, most don’t realize how bad the economy has to be if 0 percent mortgages are being talked about.

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