Mortgage Rates - Where to Now?
It would be fair to say, I think, that, irrespective of who won, the election result was always going to create some sort of reaction in financial markets.
And that is exactly what's happened, with an initial dip in stocks, followed by a strong rally.
Unfortunately, this has led to less enthusiasm for bonds, the fortunes of which are closely related to mortgage rate levels.
Bonds are seen as a safe-haven when investors are risk averse. The election result created relative certainty as to the forward direction of the nation, at least in terms of who will be President and the composition of both Senate and Congress, so interest in stocks has improved for now, while we've seen bonds becoming less attractive in the past week, with the side-effect that we've witnessed the biggest percentage climbs in mortgage rates for some time.
Here, however, is where we need to draw breath, put the more exaggerated news headlines to one side, and take a calm look at what's going on at the moment.
Mortgage News Daily today quotes the benchmark 30 year fixed rate mortgage at 4.02%. While it's not good news that rates have nudged above 4% for the first time since early this year, and there has of course been a short-term reaction in fewer mortgage applications in the past few days, let's not lose sight of the fact that we're still enjoying relatively very low interest rates from an historic perspective.
It's true to say, of course, that we've all become accustomed to rates consistently heading in a southerly direction. As I've indicated many, many times on this blog, however, that was never a permanently sustainable trend.
Renewed enthusiasm for riskier investments potentially heralds in more confidence looking ahead, but this inevitably has a knock-on effect with mortgage rates. All that being said, the current rally has to continue, with no other negative external factors causing a retreat to bonds, such as changing world affairs, for the upward drive in mortgage rates to last. If recent times have taught us anything, it's that one can never be certain that any kind of trend, be it positive or negative, will be unaffected by external influences (remember how Brexit helped mortgage rates dip even further during the summer!).
If we go back to this time a year ago, many experts were predicting that mortgage rates would progressively move upward to somewhere between 4.5% and 4.65% during 2016, so we still have a very long way to go before those expectations are close to being matched.
As ever, it is simply impossible to know what's going to happen to rates in the weeks to come, as so many factors contribute to what level they'll find.
In the end, predicting interest rates is always a gamble and I would suggest that the more sensible approach right now is to take the view that rates are still historically low. While it is tempting and understandable that buyers will want to be sure that rates aren't going down again, unfortunately playing a waiting game can have the opposite effect. No one knows.
My team and I would be happy to discuss any aspect of current market trends with you. We can also connect you with the top mortgage experts in the area, who will be able to assist you with any financing concerns you may have. Why not contact us today.