by Amber E. Schaller

The real estae world has been sent completely on its ear this year, with bailouts, credit problems, foreclosures and more. What’s in store for us now? Is there any way to know if the rates will continue to go down?

Usually, with conditions so tight in the lending markets, one would expect banks to lower their rates to attract the best customers. But it appears that banks are actually raising rates, in the hope that will improve their revenue.

It seems pretty short sighted, but to make up for falling revenues, banks are increasing rates across the board, instead of offering attractive rates for their most credit worthy borrowers. This shortsightedness is not limited to the mortgage industry; credit card companies are doubling and even tripling their rates in reacton to defaults on the part of customers in this depressed economic environment.

It used to be that when the economy slowed down, lenders would lower their interest rates and this would give an incentive to borrowers. Things are not like they were before, though, and new rules seem to be the rule.

How should a homeowner view this crisis, and what things should he be doing? Wait for this time to pass and for rates to come down or grab a loan now, while there is still some credit available, or wait for the fallout from the recession?

Some economists are not only predicting a recession, but even a depression, with deflation instead of inflation. Normally, deflation will in turn lead to lower interest rates, so this indicates a wait and see approach is the best to take at this point.

There are lenders who are still granting mortgages. Many small banks are not suffering from the credit crunch that has hobbled many big banks. In this case, being small was better, because many of them were insulated from the issues now haunting most of the credit industry.

There is another strong reason for waiting to buy right now and that is because home prices probably still have a way to come down. The Case-Schiller study that came out in November of 2008 reported year on year decreases of 17% nationally, with 25% in some locales. The scene seems to be perfect not only for lower interest rates, but lower housing prices as well, with the wise homeowner putting off his plans until the entire mess is sorted out!

http://thephilippinerealestate.com/articles/mortgage-insurance-in-canada-interest-rates-in-the-new-world-of-mortgages/

reviewed by Moishe Alexander, CFC canadian funding corp CEO