VA Loans Ride the Rollercoaster

Perhaps our version of “build it and they will come” has indeed come to pass. Our version should read “write it and it will happen”. Two months back we predicted, based on historical data, that interest rates will drop in a recession. It’s happened every time since the early 1970’s. At the time of our writing this rates were zooming up, crossing the 7% mark. That is not the case today even though the economic gurus are shying away from use of the word “recession”. Say it isn’t so Joe! But, in fact, it is. Ask anyone on main street. But, here comes that silver lining in an otherwise gray cloud of downward moving economic numbers.

Despite the Federal Reserve Open Market Committee (the Fed) raising it’s Prime Rate 7 times thus far this year we’ve seen some decline in VA mortgage rates here in the upper Midwest. VALoanMN rates have tumbled in recent weeks. We suspect the perception of high rates have not followed suit.

Less than a year ago VALoansMN was able to procure rates in the 3% range. Then came the inflation (stagflation?) in the following months. So as we were getting used to very cheap money here came the increases catapulting to the 7% range. If we’re still seeing 6% mortgages as high it’s only because we’re comparing it to the lower rates available earlier this year. Surely we can all agree that a 6 is lower than a 7 and lower is good, right? But what will happen now?

The short answer is “no one knows”. We do mean NO ONE, not even the Fed (they so misjudged the severity of the inflation why would we trust their prognostications anyway?). We can only harken back to the data we reviewed in our earlier post. In every recessionary period since 1973 mortgage interest rates have DROPPED. The question becomes are we sliding further into a recession in the coming year? 

Here’s the rub: you can sit on the sidelines hoping for dropping rates (or home prices) or you can take what’s available today and perhaps look back in a few years and think to yourself “wow, and I thought a VA Loan rate of 6% was high and look where we’re at today!” Any homeowner over the age of 50 can tell you what a high VA mortgage rate is and it is stated in double digits. Rates today may, in the long run, be very attractive.

Finally, we at VALoansMN/Luminate Home Loans wish you good tidings this holiday season. May you and yours make many good memories!