Mortgage Rates Fall Slightly Again

Well, it seems that creditors must be heating up the competition for people with good credit scores. The rates have fallen again in the last month, and it's not because the Federal Reserve has dropped their rates.

Why is this happening? Here's my theory: it's because we have seen a higher than usual default rate in the past couple of months for mortgage payments. My thought is that we're likely defaulting on payments because we are dealing with Christmas season "hang over" -- credit card debt that we shouldn't be carrying.

The good news is that lenders are seeing defaults on payments, but not complete defaults on the loan itself -- at least not yet.

So, as lenders deal with people who are stretched too thin, they are out looking for people who can afford their debt, and they are making it as attractive as possible. Ergo, lower rates.

Don't be fooled by lower rates. Have you seen Oprah dealing with debt on her show? Debt is a hot topic it appears, and even the daytime talk shows are dealing with it. We do need to get our personal debt levels down. (Perhaps Mr. Bush should be watching Oprah and dealing with that huge federal deficit and debt that our country has collectively.) Low interest rates are only in your favor if you are actually paying down debt. If you are getting into more and more debt, even low interest rates are costing you money.

In my own life, we are actually finding that we're spending less on our credit cards than ever before, since baby Rayna arrived. While that might seem strange, it's because we've started eating at home more (it's hard to eat out with a little nursing baby) and we've stopped taking long drives on the weekend to friends and family (same reason as above -- little nursing babies nurse frequently, and stopping by the side of the road to let my wife breastfeed in the back seat just wasn't much fun for her). Two small things that have reduced our monthly budget by a couple of hundred dollars.

It's amazing what small changes can do. We'll be making a lump sum payment against our mortgage soon.

Michael

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