Mortgage Rates Predictions – What Do They Mean?
Governments around the world are intervening to stave off the effects of the global financial crisis.
While this is great for the workers whose employers would otherwise go out of business, it makes mortgage rates predictions somewhat complicated.
Mortgage rates predictions have traditionally been based on market pressures. With the levels of uncertainty in today’s mortgage market, upward would have been the bet for the past 12 months.
However, from time to time, things get so bad that the government is forced to step in. This causes issues, of course, for mortgage rates predictions. It is only recently that a market experiencing an irrational bubble could cause such widespread damage that governments feel compelled to intervene. When market forces are no longer the major determinant of mortgage interest rates, then mortgage rate predictions become worth little more than the equivalent numbers derived from throwing darts at a wall chart.
The first well-recorded speculative bubble involved the market for tulip bulbs in a small geographic area in Europe. The vast bulk of the population was unaffected, if not totally unaware, of the fortunes been made and lost in tulip bulb speculation. Mortgages were almost unheard-of, with the wealthy owning property outright, and the poor renting their homes. Mortgage rates predictions were a nonsense at that time.
Markets have become more interconnected now, and the Great Depression of the 20th century was an object lesson about how far-reaching the effects of a cash squeeze could become. All eyes are on the current global crisis, looking for ways to stave off another global downturn of such epic proportions.
Mortgage rates predictions these days are more a matter of politics than economics. The tea boy at the White House is probably better placed to make mortgage rate predictions than all the number-crunchers on Wall St.
While mortgage rates predictions may have become decoupled from market forces, this is not necessarily a bad thing.
The chaos of the Great Depression gave rise to a new school of economics, which recognised the role of the government in smoothing the wilder fluctuations of unchecked market forces. Mortgage rates predictions are grounded in the assumption that there will continue to be a market for mortgages, and sometimes, government intervention is required to ensure this basic assumption of mortgage rates predictions is well-founded.
We may need to make our mortgage rates predictions using the entrails of a goat for a few months or a year, but after that, we should be able to go back to making mortgage rates predictions using the traditional market forces. It seems a small price to pay to avoid the situation in which there is simply no way to get a mortgage of any kind.
Posted by Carlos Sagastume on February 14, 2009. Filed under HUD Homes.
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