Wednesday, June 27, 2012

Europe's Club Med States responsible for your low interest rates

We are half way through 2012 and the news says our economy is picking up. Yet, the small business sector says they don't feel it as the unemployment rate is still hovering at 11.8%. here in LA.

This past 6 months the European debt is leading the news regarding their own financial meltdown that is being felt globally. 

It seems that Round 1 of the Global Credit Crisis went to us, the United States, with housing mortgages. Round 2 is a new version of "Sub-Prime" and that is "National Debt".  Italy, Greece, Spain, Portugal and now Cyprus  (a.k.a. Club Med) will need to be bailed out in order to not declare bankruptcy.  

As it turns out, Germany is the mainstay of the Euro and the sport of soccer with 3 World Cup titles and countless Euro champions, and while most of these countries feel the dominance of German in soccer,  the Germans are baring the brunt of  the Club Med States debts.  However, like here at home, they will need to make big changes in order to insure that it does not happen again.

With all this fear of debt that the Euro Club Med States have accumulated has a caused a flight to safety, which is our US Bond Market.  the more these investors buy our bonds along with the Federal Reserve's own "Operation Twist" of purchasing of these bonds has driven home interest rates to below record levels.  It's crazy how many LA homeowners have refinanced once per year for 3 years in a row, and having the bank pick all the fees every time. 

Operation Twist explained (audio and text)

Housing prices and interest rates are at historic lows so, if you are looking to refinance, or purchase, now is the time to take advantage of this.

In meeting with clients, we often see well-meaning people who think that they arre doing the right thing by paying more towards their mortgage instead of increasing their savings first.  I am compelled   to ask them why not take care of the family bank first?  It is wise to pay off your mortgage, however, only after you have  taken care of the family bank first.

This means that before you pay down your mortgage, It is a wise move to have at least one year's worth of expensess in your savings account.  Depending on your circumstances, it is also wise to have a college and/or retirement fund that is well established. Only after those items have been put into place is it advisable to look at your mortgage and determine if paying it off will be beneficial. 

You see, the banks, being in the buisness of making money, will not look out for your family.  Even though you have been making extra payments, they will not let you slide a few months while you are in- between jobs.  In fact, what they will do, is ruin your credit and make it difficult for you to borrow money again.

Still to this day, the old adage is true.  " A penny saved, is a penny earned."  What I believe this means to you and I is just this...If you are looking to boost your financial security, you must plan to have some "just in case money" set aside.  The facts are simple.  If you don't have a job, I can't get you a loan; however, if you have one year's worth of expenses saved, you don't need a loan.

Like I have always said, "Don't worry. Things always work out. Just pay your payments on time and keep as much as you can in savings."

If you have not already done so, schedule a time to meet with your Mortgage Planner to and review your current situation.

If you find this info helpful, or not, and want to hear more on this topic please let me know by commenting on this blog, as well as, sharing it with friends, family, and co-workers

For more questions on this or any other: Mortgage- Insurance - Merchant Services questions feel free to contact me at