There is simply no doubt that continuing low mortgage rates have made a huge contribution to the current vibrancy of the real estate market. Buyer sentiment remains sky high and sellers have profited greatly from this.
A key question in buyers' and sellers' minds as we head into the fall will be "how long can low rates last?"
In reality, of course, no one can give a definitive answer.
What we can do, however, is look at very recent history and note how robustly rates have stayed so low in the past couple of years.
Yes, we have seen small falls and rises on a regular basis, but what has remained constant throughout this period is that rates have stayed close to historic lows. This has created tremendous momentum, as home buyers recognize that putting off a house purchase risks buying later at a higher, perhaps significantly higher, borrowing rate.
It could perhaps be argued that we are still in this admirable position through luck more than anything else. In general, mortgage rates benefit from any international or financial uncertainty, as investors seek "safe haven" investments, such as mortgage-backed securities, in these circumstances. What this means is that even when home economic news has been very strong and raising the likelihood of increased rates, the international scene has been beset with problems over the past two years, such as the crisis in Ukraine and, more recently, the financial problems of Greece. Much as they might seem distant events to us, they have actually had a very direct effect by keeping US home loan interest rates at a low level, when they might otherwise have started to climb.
Bringing things right up to date, the current turmoil in world stock markets again sees investors retreating into safe havens. While it isn't good that there is so much uncertainty around, it will most likely serve to help keep rates low as long as the current lack of confidence continues.
There has recently been much talk of the Federal Reserve raising interest rates for the first time in many years, which may have a knock-on effect of raising mortgage rates.
However, there is evidence to suggest that rates have their own movement pattern, as they have risen and fallen by about two percentage points while the Fed Funds Rate has remained virtually static. It will be interesting to see if the current turbulence in markets sees interest rate rises put off even longer. Expert opinion differs as to whether or not the current doubts should further delay rate rises, so nothing is written in stone.
So what can we conclude from all this circumstantial evidence?
It would be a big mistake to assume that, in light of recent news, mortgage rates are likely to remain so low for a long time to come. It is certain that they will rise at some point and, with so much volatility in markets at the moment, things can change very fast. Our strong advice remains to live in the present and not gamble on what might happen in future. Borrowing is exceptionally affordable right now and you are strongly advised to move forward with your home purchase and/or sale while the situation remains so favorable.
Why not contact us today and explore the best options related to your individual circumstances.