These are unconnected events, as painful as it is, except in a political sense. The Fed deals primarily in short term interest rates. Those interest rates reflect only a narrow segment of the credit markets, albeit one of the most active. Mortgage interest rates are part of the long term market and while it is not immune to FED policy, those rates are much stickier and change much more slowly. Adjustable interest rate mortgages are a different case.

Home Mortgage rates have been much higher than this in the past, well into the double digits at one point during the Volcker regime. You were fortunate to see a 10 percent rate. The Bear didnt do home loans or anything else that affected ordinary people. Your argument on lower rates causing inflation and a weaker dollar are to a considerable degree incorrect as a cause of the problem today. But there is a linkage which Ill explain. The dollar has been dropping like a rock since early in the Bush administration. Fed rate policy and resulted by a deliberate policy of a weak dollar, which is traditional for modern era Republican administrations which have generated enormous deficits beginning with Richard Nixon.

Nixon broke the fixed currency policy of Bretton Woods and floated the dollar rather than admit that his administration had destroyed its value. He had to abolish the gold standard entirely because the world was awash in dollars. In order to finance the staggering expense of his war in Iraq, Bush has been resorting to selling US debt to other countries, most notably China.

Fed to accommodate Bush has allowed M3, which is no longer officially calculated to go up like a rocket. Wars only have two certainties. Given that inflation is a form of taxation, its already here. Deferred debt is also a tax. Almost none of this has anything to do with our troops in Iraq. Theyre just getting screwed another way.

Bush pursued was a bit like the guy whos running out of gas who speeds up so hell get to the gas station sooner. The faster he goes, the bigger a leak becomes. What were looking at now is a real mess.

Were been stimulating the economy with borrowed money. Thats called stagflation and its a phenomena that happens rarely. Nixon was the last president to get us into that. There was concern that we would have difficulty getting out of it. When stagflation occurs,the Feds normal tools are less effective. The concern is that they could be completely neutered.

That can happen if actual interest rates go below zero percent. Traditional stimulus doesnt work, people are already being paid to take money. The liquidity trap occurs in deflationary times which we havent seen in this mess. But there is a liquidity crisis. All those bad home loans and the collapse of housing prices in too many places is undercutting the American economy. This could get much worse before it gets better which is why youre seeing some panicked Washington officials.

What is funny is that Bush has taken a conventional Keynesian approach in the past few weeks to deal with the slump, but with goodies for his friends. The newest package of regulation and concern is long overdue. The irony is that the New Deal established a special home loan agency deal with a very similar liquidity problem in 1933. People were losing their homes and so many did that it destroyed the credit markets.

FDR proposed a special organization which took over most of the troubled loans, wrote off some and renegotiated others. The deal in effect was that he saved the banks from themselves and saved the homes for homeowners being destroyed by incoherent credit markets.

Oddly enough, the agency made a profit from the loans banks considered uncollectible. To sum up, we have had inflation and a collapsing dollar, but it previously was due entirely to Bush economic policies. Bernanke is deliberately taking a chance in lower interest rates at a time inflation is picking up and the dollar is reaching new lows. This administration is not only incompetent. It is a complete and utter disaster and we can only hope to find our way back to a fiscally sound government. It was only 8 years ago that we had what Greenspan called the Goldilocks economy and our biggest concern was possible deflation.

Its going to destroy businesses like mine and thats just going to make it worse. For example, look what happened to the housing market.

11, the housing and stock markets went into a steep dive as people felt the panic of the attacks. In response, the Federal Reserve reduced interest rates to make it more attractive for businesses to borrow the money they needed to keep the economy going. And, eventually, this filtered down to the home mortgage market. As mortgage interest rates fell, home prices increased. This is because of the way the mortgage system is set up. Unless they pay cash, people dont buy property based on the list price of a home; they buy property based on how much it costs per month. So, when interest rates plunged, housing prices increased at about the same rate. Then came the speculators, who figured that buying a house today might turn them a profit by selling it a year later. As more and more people made serious profits by flipping houses, the demand for houses increased even further, which caused even greater price increases. At that point, the housing market was said to be on a bubble, not on a sound financial foundation. And, all it would take is for some event to come along to pop that bubble, sending the housing market plunging into the ground. The event that caused this housing bubble to pop was the mortgage crisis. Housing prices were so high and people were so desperate to get a piece of the pie that they took out loans they couldnt afford. And, people figured that prices would have come up enough by then for them to sell for a profit before they had to pay the higher rate. Unfortunately, another mechanism was at work: new housing was being built and housing inventories grew faster than demand.

Housing developers couldnt sell their units and began reducing prices. This caused all housing price increases to screech to a halt and begin to reverse. As more and more ARMs began to adjust upward, some peoples monthly payments doubled or even tripled to where they simply couldnt afford the payments. So, they stopped paying and the bank took their property away. The banks arent in the business of owning property and want them off the books fast. So, they reduce the price for a fast sale, which drives down the prices of all property in the area. Once the flood of foreclosures subsides and housing inventories come back down to reasonable levels, were going to see prices come back up again.

Slowly at first, and maybe with a bit of a hiccup after the first year or so. But, expect to see real estate make a rebound and be back to peak levels of 2005 and more in the next 7 to 10 years. Suze Orman thinks youre better off paying down your mortgage. There are really two aspects to this question: The purely financial part and the emotional part. This question is further complicated by the tax treatment of these interest rates. 45,000 during retirement until you pay off your mortgage and then 32,543 after that. All amounts are in 2007 dollars. 2036, or 10 years of withdrawals.

In full disclosure, I wrote the program that projects your portfolio into the future. You would be able to withdraw 32,543 until 2031. Or, visit this website and get your free credit report and then supply it to the lenders whom you wish to shop. President of Victory Mortgage Lenders, and also a consumer advocate in this regard.

First: make sure you are working with an experienced, professional loan officer. Here are FOUR SIMPLE QUESTIONS YOUR LENDER ABSOLUTELY MUST BE ABLE TO ANSWER CORRECTLY. Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. The answer may surprise you.

Home Equity credit lines, auto loans and the like. On the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change. This is due to the dynamics within the financial markets in response to inflation. More than likely, this is one of the largest and most important financial transactions you will ever make. Were ready to work for your best interest. First, IF IT SEEMS TO GOOD TO BE TRUE, IT PROBABLY IS. Mortgage money and interest rates all come from the same places, and if something sounds really unbelievable, better ask a few more questions and find the hook. Second, YOU GET WHAT YOU PAY FOR. If you are looking for the cheapest deal out there, understand that you are placing a hugely important process into the hands of the lowest bidder. Best case, expect very little advice, experience and personal service.

Worst case, expect that you may not close at all. Internet, and we wish you good luck.

Most importantly, remember that the cheapest rate on the wrong strategy can cost you thousands more in the long run. This is the largest financial transaction most people will make in their lifetime. Of course our rates and costs are very competitive, but we have also invested in the systems and team we need to ensure the top quality experience that you deserve. You absolutely must compare lender fees to lender fees, as these are the only ones that the lender controls.

Easily manipulated as well, and worthless as a tool of comparison.

Fourth, UNDERSTAND THAT INTEREST RATES AND CLOSING COSTS GO HAND IN HAND. Either of these balances might be right for you, or perhaps somewhere in between. It all depends on what your financial goals are.

Fifth, UNDERSTAND THAT INTEREST RATES CAN CHANGE DAILY, EVEN HOURLY. You also must know the length of the lock you are looking for, since longer rate locks typically have slightly higher rates. Again, our advice to you is to be smart. Home mortgage interest rates are at all time lows right now.