Why did mortgage rates fall last week? Will low rates last?by Tim Manni
For most of February, everybody seemed to be worried about rising mortgage rates. Yet, mortgage rates managed a decline last week. Why did rates fall?
Political unrest in the Middle East was the main reason homebuyers and refinancers had the opportunity to snag some better deals on mortgage rates last week. “That improvement [in rates] is largely related to a flight-to-safety buy of Treasury bonds,” wrote HSH.com VP Keith Gumbinger in the latest issue of HSH.com’s Market Trends Newsletter. “Yields on 10-year U.S. Treasuries (which influence fixed mortgage rates) have dropped by perhaps 20 basis points or so over that time, dragging mortgage rates in the same direction, if to a lesser degree.”
As long as the U.S. remains the place to stash cash when these global events occur, at least some benefit will accrue to American mortgage seekers. However, these events and any benefits are of unpredictable duration, so folks actively engaged in the mortgage process would do well to move quickly to lock in rates and secure transactions.
Where did mortgage rates end up last week?
HSH.com’s overall mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — noted that the overall average rate for 30-year fixed-rate mortgages eased by nine basis points (.09%), ending the last full week of February at an average 5.23%. A key component of the first-time homebuyer market, FHA-backed 30-year fixed-rate mortgages decreased by eleven basis points to 4.84% for the week. Hybrid 5/1 ARMs, usually the most viable alternative to the traditional 30-year FRM shed a full tenth percentage point (0.10%) to close the period at 3.91%.
Uncharted territory ahead
What makes predicting future market conditions so tough is that we’re entering uncharted territory. As Gumbinger notes, “the path forward is uncertain.” We can’t count on the markets reacting to an event — either here or abroad — in a predictable manner:
One thing is true, though: Relative to where we are, in terms of mortgages and real estate markets, the path behind us is a mess and the path forward is uncertain. As we work though this unclear transition, markets may or may not react in predictable ways or even ways they have in the past given similar circumstances. Uncertainty creates risk, and risk usually creates higher interest rates, not lower.
Will mortgage rates rise next week? To find out, click here to continue reading “Mortgage Rates Back Off.”