We have all become a little complacent about the six percent mortgage interest rate; it has been there for quite a while now. No need to jump on it - yet - let's see what the realty market is doing.......is this your take on it?

Well, one of the country's most respected real estate economists has come out with some scary thoughts. Doctor Mark Dotzour who is the chief economist of the Real Estate Center at Texas A & M University, predicts a rise in interest rates: big time.

Much of the population can still remember the days when mortgage interest rates went well into the double figure bracket; it can happen. There were a lot of lost homes then, just like now.

The reason for the prediction has been explained to the public at large like this: Inflation is rampant all over the world and especially in USA. Inflation in USA means that the American mortgage interest rate should be up high.

However, the countries of the world are worried that USA's inflation problem may bring about the collapse of global banking, so to support the world-wide system (hence themselves), they are buying into US treasury bonds.

The fear of a collapse of the world's banking system as we know it is greater than the fear of inflation, at the moment. That is why you can still get a 30 year fixed rate mortgage at just under 6% (if you have good credit).

Once the banking system is revived and there is no longer a fear for the global collapse of banking, treasury rates and mortgage rates will start to move up, and Dr. Dotzour thinks it could be substantial.

The advice from the chief economist at Texas A & M University leaves the final decision in your own hands. Your actions, as an existing home owner will depend on your own view of this situation.

For instance, he says, if, as an existing homeowner, you think that we are in for a global financial collapse, then don't re-finance because interest rates will continue to fall.

Alternatively, if you think that the central banks both around the world and in America will not allow this to happen, then get a fixed rate mortgage while interest rates are still low.

What is the advice from Dr. Dotzour for buyers? He thinks that now is still a good time to buy. The foreclosures have caused a glut of housing inventory, which lessens the price of realty.

The amount of homes for sale means that you can negotiate with a seller who may be determined to sell. As a buyer, you are also in short supply to the seller as there are many homes on the market. The mortgage rate is very low, making it cheap to borrow money. These are amongst the contributing conditions that define a buyer's market.

The best understanding to be gleaned from this information is that whilst it may be wise to buy now while interest rates are low, two conditions apply. If you think that world banking will survive this crisis, be sure that your mortgage is on a water tight fixed rate contract. This means that the rate is locked in.

If you are tempted to take a lower interest rate 'variable' for a while etc. etc. then make 100% sure that you can change to a fixed rate on the very day that you want to. An attorney will help you with this clause.

The second precautionary measure would be that you do not mortgage yourself to the hilt. If mortgage rates go up that high, they may still be high in five years time when your mortgage is up for renewal. You will need some leeway. Play safe - you are dealing with the big boys now.

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