May 10th, 2010

“Mortgage Borrowers Benefit from Fear and Panic”



Last week was a wild one — between the turmoil in Greece and the nearly-1,000-point drop in the Dow Jones Industrial Index — as investors shifted their money to safer investments (including gold and US Treasuries), causing mortgage rates to fall.

According to the latest issue of HSH.com’s Market Trends Newsletter, “Mortgage Borrowers Benefit From Fear and Panic,” uncertainties in the global markets combined with the panic caused by the massive drop in stocks has worked to the advantage of potential homebuyers and existing homeowners.

The fear and the panic last week did overshadow the fact that the U.S. economy continues to grow, and so do jobs. While “an accumulation of good news about the economy would normally have caused interest rates to flare higher,” that’s just not the case in this kind of climate:

HSH’s market-spanning Fixed-Rate Mortgage Indicator (FRMI) declined by four basis points (.04%) to close the weekly survey at 5.32%. The FRMI includes rates for conforming, jumbo and the GSE’s “high-limit” conforming products in its calculation and so covers a wider audience than other surveys. The average 5/1 Hybrid ARM — presently the most popular alternative to the traditional fixed-rate mortgage came in at an average interest rate of 4.38%, down three points from 4.41% [seen two weeks ago].

Conforming 30-year FRMs sported a daily average interest rate of 5.01% for Friday [5/7/10].

How does/will the uncertainties in Greece influence mortgage rates?

These crises can be useful or even benevolent things, for some, like potential homebuyers or refinancers looking for rock bottom interest rates.

That said, it’s also worth saying that these panic-fueled downdrafts in rates are untrustworthy things, subject to even faster turnarounds than the declines they enjoyed. This being the case, it’s an excellent idea to lock the rate for any mortgage you may be considering.

We didn’t expect a catastrophe-induced decline in rates this week. Rather, we thought the tenor of economic reports would be good (they were) and that rates would tick a little higher. Given that they went in the other direction, we cautiously expect a small increase [this] week as some clarity comes to the marketplace.

Click here to continue reading “Mortgage Borrowers Benefit from Fear and Panic.” HSH.com’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.

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One Response to ““Mortgage Borrowers Benefit from Fear and Panic””

  1. Tweets that mention Mortgage Borrowers Benefit from Fear and Panic Last week was a wild one. How does/will Greece influence mortgage rates? -- Topsy.com Says: May 10th, 2010 at 11:00 am

    [...] This post was mentioned on Twitter by HSH Associates. HSH Associates said: Mortgage Borrowers Benefit from Fear and Panic http://bit.ly/a1OMRh Last week was a wild one. How does/will Greece influence mortgage rates? [...]

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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