Warren Buffett describes his investment philosophy as being fearful when everyone else is greedy and greedy when everyone is fearful.
Today, fear abounds in the mortgage bonds market and that is driving mortgage rates higher.
Rampant fear is why I’m suggesting that borrowers float their mortgage rate. I had been advising borrowers to lock loans, until all hell broke loose, on March 6,2007. Investors are worried that the mortgage bonds they hold will be worthless.
This market is a lot like the junk bond market of the late 80s. Those that panicked lost money; those that kept a cool head, profited.
Today a 30 year fixed rate loan is offered at 6.25%, up from 5.875%, and a 7 year ARM is at 6.125%, up from 4.875%. Continue reading this post