Hi everyone this is Jeff Rutt. This week mortgage rates hit another all time low which has investors, homebuyers and financial analysts wondering how long the trend of lower interest rates will continue. According to the article below the recent drop is a result of the financial instability of the European markets which is causing investors to turn to US investments. In spite of the concern over the European financial market, lower interest rates can be a benefit to everyone in the housing market. For homebuyers who are sitting on the fence, its best to take advantage of these low rates now, as the future of interest rates is uncertain.
How Low Can They Go? Mortgage Rates Fall (Again)
Michelle Ruiz and Nilson Ruiz listen as Wells Fargo home mortgage consultant, Michael Carreras, helps the potential homeowners with their an application for a down payment assistant grant at the Miami Airport Convention Center in Miami, Fla.
Defying logic, mortgage rates sunk to new lows this week on news that the U.S. and global economy could be slowing down more than economists originally anticipated.
Interest rates on 30-year fixed-rate mortgages averaged 3.66 percent, Freddie Mac reported Thursday, falling from a 3.71 percent average last week. Borrowers opting for a 30-year fixed-rate mortgage this time last year were stuck with a (comparatively) sky-high interest rate of 4.5 percent.
“Mortgage rates are reaching record lows based on overall uncertainty in Europe,” says Doug Lebda, CEO of LendingTree.com.
That uncertainty has spooked investors causing a rush into the perceived safe-haven of U.S. treasuries, which drives down yields. Because mortgage rates are pegged to the 10-year U.S. treasury, when yields fall on treasuries, mortgage rates retreat as well, Lebda says.
Freddie Mac vice president and chief economist Frank Nothaft blamed worsening economic data for the continued retreat of mortgage rates. Measures of industrial production fell in two of the past three months, disappointing forecasters who predicted stronger output. Meanwhile consumer sentiment registered its lowest level this year, according to a University of Michigan survey, signaling increased anxiety among Americans about the outlook for the economy.
Slowing job creation and anemic consumer spending also concerned economists, in part prompting the Federal Reserve to maintain its policy of keeping interest rates low.
Still, there are some bright spots for the housing market amid the gloomy data bringing mortgage rates down. Construction activity, a sector that has historically fueled economic recoveries, seems to be gaining a foothold after being all but absent following the housing bust. Confidence among builders has followed suit, rising to its highest reading in more than five years.
The overarching question for the mortgage market going forward isn’t how much lower rates can go, Lebda says, but who will be able to obtain a mortgage. Despite record low rates, it’s still very difficult to get through the mortgage application process and get approved.
“Underwriting standards remain stricter,” he says. “There’s still a more risk-averse attitude on [the part] of the lender.”
Thanks again for reading stay tuned for more articles and comments-Jeff Rutt