Among the key precepts of King Solomon’s guidelines for success as revealed by his sayings in the Book of Proverbs, prudence and planning rank with wisdom as the essentials for living a prosperous life. Taking the long view toward prosperity and stability is better than aiming for quick, short-term gains, he says: “Substance got in haste shall be diminished, but that which is by little and little gathered by the hand shall increase.” (Proverbs 13:11) For income property investors, the benefits of low mortgage interest rates gather over time for significant returns on the investment. Although the future of mortgage interest rates is cloudy, inventors taking advantage of the current low rates can create a major asset for the future.
For the past year or so, mortgage interest rates have been holding at or near historically low numbers, dipping to below 3% for some types of loans. These rates are not entirely a natural product of the markets, though; they come in part as the result of an effort by the Federal Reserve to stimulate the housing market in the aftermath of the massive housing collapse of 2008, when record numbers of subprime mortgage loans crashed, sending the housing market into crisis
Now, trend observers such as Fiscal Times and the Urban Land Institute report that these unprecedented low interest rates can’t be sustained, and home buyers need to expect a rise in mortgage interest rates beginning in 2013. They warn that although this upswing in rates may initially be relatively minor, rising to 4 to 4.5% in the early part of the year, it signals the start of a swing back to higher rates that should continue for some time.
But crystal balls can sometimes be cloudy. These reports come in the wake of reports that the Federal reserve is planning a new round of buying mortgage backed securities in an effort to pump more vitality into a housing market that’s still wobbly despite in increase in new home starts and a decline in the number of foreclosures. Back in September 2012, the Fed announced plans to buy up about $40 billion in these securities per month, and the new plan adds an additional $45 billion to that figure every month.
With around $85 billion monthly in mortgage backed bond purchases coming alongside the general fluctuations of the market and the treasury bonds that typically secure mortgage debt, reports from the last months of 2012 suggest that rates are likely to remain relatively low until around 2015 – although they may not dip to the current rock-bottom lows of today’s market.
For investors in income property, or those planning to start investing with Jason Hartman’s system for creating wealth from income property, this means that a fixed-rate mortgage at the current low rates can be a major asset for the future of the investment. The future of mortgage interest rates may not be crystal clear, but for now the record low rates are a reality, creating some ideal conditions for starting a career in investing in income property — a prudent way to gather substance that will increase. (Top image: Flickr/DanielMathison)
The Solomon Success Team