I’d bet on steadily lower rates for at least the next six months as the recession casts it deflationary pall over everything.
Until recently, I was a believer in inflation in the long term ultimately driving interest rates higher. But the deflationary atmosphere is just too powerful, and even the government’s upcoming massive deficit spending and the Fed’s loose monetary policy is, so far anyway, not enough to offset the psychology of deflation.
And yet, if I were a mortgage lender, I wouldn’t make a 30-year loan at 5%, or 6%, or 7%. Inflation’s day will come.
