I had an interesting conversation with my financial buddy, Brandon Foor, that got me thinking. My regular readers will remember that Brandon Foor is a college professor, teaching finance and related topics. Brandon relocated to Las Vegas earlier this year, and is a frequent contributor to my blog.

Media outlets such as Fox Business and CNBC have been portraying information in a manner that might lead one to think that lenders and banks are going to go through a banking crisis similar to the one in 1989. While the details elude me, Brandon reminds me that 584 banks shut their doors in '89 due to complications from debt and poor management decisions – mostly due to banks investing in oil and real estate.

According to Brandon, the FDIC had over 1,500 banks on credit watch in 1989. So how does this compare to today? The FDIC currently has 76 banks on credit watch. Just 76. Only three banks went bankrupt in 2007, compared to 584 in 1989.

The media is speaking about stagflation, hyperinflation and devastating foreclosure numbers — and the average consumer is absolutely panicked. Oil isn’t going down, gas is going to continue to rise and commodities appear to be strengthening.

So why did I find this interesting? Because much of this relates to bank interest rates to a degree. Many of us are wondering why interest rates are not dropping to the degree one might expect, given these and other factors including the recent cuts by the federal reserve. Brandon posits that it's because banks are refinancing thousands of loans right now and they’re trying to recoup losses. (As a reminder, mortgage rates are not tied to the fed funds rate; mortgage rates are affected by the price of mortgage bonds.)

Many of my clients are from out of state, and are pulling equity from their homes to buy a second home or an investment home in Las Vegas, before the prices begin to rise. Should you refinance right now? If I had a crystal ball, I could tell you with certainty. My hunch is that if you wait a month, you might be thanking Brandon for his foresight. But it’s just a hunch.

Rates are still low to begin with, so it might or might not be worth taking a risk. In any case, if you are thinking of refinancing you should have your 1003 completed and be watching for the next drop. When rates dropped to under 5.25% on January 22, it was a one-day window of opportunity; within a month the 30-year-fixed rate had jumped by over one full percent. It may pay to be positioned to move quickly.

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