Choice of right mortgage now – life after bond market crash
Karen Zuba
Jun. 12, 2007

What do you do when the bond market has crashed? The mortgage rates, especially the 15 and 30-year, will rise sharply in a week or so. The long bond yield skyrocketed and the bond market collapsed. If you are in the market for homes, your face massive troubles. The rates will jump by 0.6% within a week. That can make impossible for may people to buy homes.

The best choice in this situation is to opt for one-year adjustable rates. The reason is simple, the long rates have skyrocketed but the short rates did not even move. Do not lock in so fast. Three-month euro dollar futures are showing signs of rallying. That means you nay lock in far better in a month or two as the short rates fall.

Federal reserve will lower the rates fast between now and 2010. The rates can go to zero just like in Japan once the Fed realizes deflation is the problem not inflation. Long rates will stubbornly stay higher for fundamentally weaker dollar. You are far better opting for adjustable arm linked to one year Tbill.

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