World events bring advantages to homebuyers, refinancersby Tim Manni
While it may seem selfish to consider your own personal advantages that could arise from such tumultuous events like the ones that have occurred in the Middle East and Japan over the last few weeks, but the reality is that if you’re in the market to buy a home or refinance your mortgage, these world events have brought mortgage rates down, offering yet another opportunity to take advantage of some of the lowest mortgage rates in decades.
What is it about these types of negative events that causes mortgage rates to fall? The latest issue of our Market Trends Newsletter explains why:
The world’s troubles sent investors scrambling for a place to hide [last] week, with stock markets having a few rough days. Among the most favorite places to stash cash are highly-liquid U.S. Treasuries, and investor demand for them has driven the yield on the benchmark 10-year Treasury down by more than a quarter-percentage point over the last week or so.
The massive earthquake in Japan, followed by an indescribably destructive Tsunami which in turn triggered perhaps an unprecedented nuclear crisis may have far-reaching political and economic effects. In the Middle East, political unrest is creating near civil war in Libya, and rising oil prices threat that n to slow an already tepid domestic recovery.
As we already mentioned, these global issues come to the advantage of U.S. mortgage shoppers who are poised to see rates approach their 2011 lows:
HSH.com’s overall mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — found that the overall average rate for 30-year fixed-rate mortgages declined by six basis points (.06%) to finish the week at an average 5.08%. A key component of the first-time homebuyer market, FHA-backed 30-year fixed-rate mortgages slipped by a eight basis points to land at 4.72%. Hybrid 5/1 ARMs, often the most viable alternative to the traditional 30-year FRM (especially for jumbo buyers) also eased back the most, declining by eleven hundredths of a percentage point (.11%), ending HSH’s survey at 3.72%.
The conclusion of today’s Market Trends Newsletter notes that while time isn’t the cure for all things, it does allow the markets to grow accustomed to conditions and work around them. Most analysts, including HSH.com’s own Keith Gumbinger, still firmly believe that mortgage rates will eventually trend back upwards.
While our Market Trends Newsletter is only a week’s worth of analysis, we also produce a two-month forecast for mortgage rates which currently takes us up through April.