Current Thoughts on Mortgage Rates

Although we constantly reference their important influence on the real estate market, it’s actually a little while now since I last reviewed what’s been happening with mortgage rates. So let’s catch up.

This year started off with rates continuing to rise following last November’s election. This was in response to the positive reaction in financial markets, which saw riskier investments becoming more popular again. This meant that safe-haven investments like bonds were not in as much demand as they had been, with the consequent knock-on effect of driving up mortgage rates offered by lenders.

The most interesting aspect of this period of progressive, though modest, rate increases was that it didn’t appear to dent confidence and enthusiasm among buyers at all. I believe several factors played into this, including a growing awareness of the need to snap up the right home in a time of low inventory of available properties for sale across most market sectors and also the reality that, even though they had risen somewhat, rates were still very, very competitive on any historic scale.

In recent months we’ve effectively seen a return to the situation that has generally informed the market for many years now.

A variety of financial and political dynamics have resulted in a lowering of rates from their early year highs. That’s not to say that their journey is only in a southerly direction however, as we have seen a few periods when they begin to rise again, only to start moving in the other direction as certain national and world events unfold.

Overall, however, rate levels have been relatively stable in response to mixed messages about the economy and international affairs.

If we look at the past couple of weeks of news, we see a typically mixed bag.

There has been a report of better than anticipated retail sales, at the same time as there was a smaller than expected rise in September’s Consumer Price Index (CPI). We also learned of job losses (mainly due to natural disasters) and an overall fall in August’s employment rate. There was also higher than expected wage growth.

Markets are also still very wary of volatile events on the international stage, with a particular focus on events related to North Korea.

All this has an effect on the attraction of bonds as an investment option. This means that Mortgage Based Securities (MBS) are more in demand when news discourages risk, which in turn has the effect of lowering mortgage rates. The reverse often happens when we have a period of broadly good news.

So, as we move ever closer to the final stages of 2017, it’s very true to say that mortgage rates are still having an incredibly positive effect on buyers, who are aware that such low rates are unlikely to last forever, although who can predict when that will be? Even expert forecasts have been very wide of the mark in recent years.

For now, however, rates provide excellent incentives for buyers to act quickly and sellers to take advantage of the situation. Why not contact us today to discuss the best way to make the most of where mortgage rates are currently at. We’ll also be pleased to put you in touch with top local professionals in this field.

Dominic Nicoli