August 31st, 2015 8:19 AM by Joan Rusco
What’s the rate on a V.A. mortgage loan? Any answer we give at this moment will change in the next moment. Rates change. Constantly. There is no simple answer to that question. But in this memo we want to give you a perspective you’re likely not to get on any other mortgage web site.
In the past months we’ve repeatedly indicated that mortgage rates are at historic low rates and that veterans should think long and hard about taking advantage of this place in financial history. Now we believe there will be some changes and those changes may be beneficial to you.
On the front pages of almost all financial news publications there is a constant stream of information about the upcoming rate increase. Experts say it could come at this months meeting (September) of the Fed. Others believe it will come at their regular December meeting. So what if the Fed (technically the Federal Open Market Committee) does raise rates? What will that mean to your mortgage rate? You may be surprised at what we are about to say.
First, the Fed does not set mortgage rates. All the talk about the Fed raising rates applies to one thing and one thing only; it’s the rate the Fed charges to banks for very, very short term lending. It’s the rate the central bank charges for a bank to borrow for a few hours, not a few months or years. So if the Fed raises this rate does that mean other rates will follow? Not necessarily.
It is possible when this very short term rate is adjusted upward by the Fed that other lending rates could follow. Consumer rates for car loans, appliances, furniture or personal loan rates might go up. But the longer term rate for a mortgage? They could actually decrease!
Are you kidding? The Fed could raise rates and mortgage rates could go down? It’s possible and we’ll tell you why.
Mortgage rates are a more accurate reflection of what the market sees in the long term. If the Fed follows through as expected this year and raises the short term rate the market might interpret the move as the Central Bank getting a hold on inflation, not letting it get out of hand. The market could very well say since the Fed is moving on the fear of coming inflation prices are likely not to rise rapidly, inflation will stay down. It means the fear of the future will diminish and rates could stay where they are now or perhaps, just perhaps, they could even go lower. Add to this picture the slowing of economies elsewhere in the world, primarily China, which could keep the fear of future inflation well in hand.
Now back to the question posed at the opening of our blog: What’s the rate on a V.A. loan? We can answer that for you but it applies to only you. Give us at VALoansMN a call. This is what we do. We find you the best VA Loan rate at the lowest cost. What is your rate?