Mortgage interest rates have been hovering around the same area for the last couple of months. We did see some improvement in the last week with FHA 30 yr rates dropping close to 4.5%. Conventional rates are still higher, depending on credit scores and other factors, they range between 4.75-5.0%, maybe higher. After the earthquake in Japan, there was "flight to quality" buying spree – which means investors were pulling money out of the stock market and putting it in more secure bonds. They were concerned about more risky investments and look for a safe haven until they decide the risk has passed.
We have seen the earthquake in Japan, the unrest in Egypt and now Libya. All of these are concerns to investors and as they decide to look for safe investments, the money goes into treasury bonds, mortgage securities and corporate debt. That will allow for interest rates to improve which is what we saw last week. This is typically a short term result.
No one knows when investors will start to pull money back out of the treasury bonds and mortgage securities to venture back into the stock market, but when it happens interest rates will go up. We had reports of higher inflation last week due to food and energy costs. Those reports normally would have spiked interest rates, but due to the events going on in Japan and the Middle East, rates didn't move much.
The Federal Reserve Board is still keeping rates low as they are still concerned about the overall economy. As we see inflation numbers start to increase, the Fed will have to adjust those numbers slowly to keep the eoncomy moving. When they do that, mortgage rates will increase.
If you are looking for a new home, now is definitely the time to buy. Interest rates are very low and we know they will start to rise. Once they do, we don't know how high they will go or how fast they will increase. The only thing we know for sure is where rates are today!! With home prices very low, interest rates very low, it is a terrific time to buy. As rates go up, you will qualify for less home and the same home will cost you more money on a monthly basis.
Leslie Vanderwerf, NMLS ID#335509, Advisors Mortgage - Email – Website
