Mortgage Discussion for the Panhandle area

As I sit in the office on a rainy day updating the interest rates for the week, I noticed how good rates are still. It seems like we have had low rates for a while now and we may be on borrowed time. Well "borrowed" is the pun of the day due to the amount of money our government has "borrowed" or at least printed for the spending lately. Let us take a second and analyze the cause and effect on interest rates.

Very simply, government spending more than it takes in creates a debt that must be paid with interest. This alone causes the dollar bill to be worth less and less as inflation (devalue of that dollar) moves with the amount our nation owes.

A couple of things happen when inflation is left unchecked and the dollar slides in value. First, goods and services cost more. Prices go up as the dollars paying for the goods and services are worth less. Secondly interest rates go up as the interest being paid is in dollars as well. The rates are one of the few "tools" the federal government has to combat inflation. As more dollars are spent the economy picks up steam. The government tries to slow down the progression of the economy by raising rates.

So what is going to happen in 2009 and 2010? That is a good question. Inflation will be on a major rise as these new government dollars hit the streets. Yet the economy is still in a downward motion as referenced by the GDP last week. That leaves us to ask when will rates go up?

Soon, is the only answer. I do not believe we will see 6% rates this summer as we need all the buying possible to spur the comeback of the economy. Though inflation has started to creep in the government is trying a new approach. The Federal Reserve is using these borrowed funds to buy the governments own Treasury Funds. Treasury funds were designed for citizens to give the government our money now and get an IOU with interest to come at a later date. If the government is borrowing money then lending it to it's own Treasury that seems crazy but in fact exactly what is happening this week and has happened two other times under the new administration. This is our governments way of artificially lowering interest rates. It works but at what price? I believe you will see this periodically until the economy stabilizes.

All that to say, inflation and high rates are coming but not for a while. What are the only two vehicles that hold true value and make money during a rapid inflation time? Gold and real estate are the answers historically but there has been a run up in gold prices as those smarter than I have already bought gold inflating the price. Real estate is depressed at this time and right for investment long term. Real estate historically will be answer to what we are about to face in light of the current spending.

With rates down and prices down I encourage everyone to look up some history on inflation and what provided the best investment cash. Then call your local, trusted realtor to find that perfect real estate investment for your family. I will set here by the phone if you have mortgage questions.