The ability of mortgage rates to stay ultra low has been one of the defining aspects of the homes market in the past year or so. But how long will this most welcome of trends continue?
The really good news is that rates stayed low throughout January and there are still no really positive signs that they are due for an imminent, and at some stage inevitable, significant rise.
For sure we will see occasional fluctuations in rates, in response to economic and international news that both have a direct effect on them, due to the attractiveness, or otherwise, of investors purchasing mortgage backed securities (MBS), which are viewed as a "safe haven" investment in challenging conditions and much less attractive when all is rosy in the garden.
In general, however, despite some relaxation of late, such as low down payment mortgages, lending standards are still pretty exacting in comparison with the policies of the past that led to recession. This means that a move in home loan fixed interest rates toward 5% would inevitably have an effect on credit availability as well as affordability for many buyers and possibly trigger falling house prices, something that the Government simply would not want to see, as the housing market is such a profound barometer for the economy as a whole. In such situations, we would be very likely to see new Federal Reserve intervention to keep rates low, such as happened until the beginning of last year with bulk MBS purchases
Put another way, although we will eventually see rates moving towards 5%, there are going to need to be strong economic conditions to support that, whereby a high percentage of buyers will still be able to demonstrate affordability and a willingness to purchase at that level.
All that being said, the economy is showing some really positive signs of health, so we are moving closer to the time when rates may start to rise. Also, if lending standards were to slacken - always a possibility - then the resulting higher demand for homes could possibly trigger a steady rate rise.
In truth, mortgage rates are affected by a multiplicity of contrasting influences. In recent months, it has pretty much been a case of what you lose on the swings you gain on the roundabouts. Last year, for example, positive economic news at home was offset by a troubled international scene in terms of conflict in Ukraine and continuing financial difficulties in Europe. All these things have a very direct effect on the mortgage rate you are quoted.
As a home seller and/or buyer, you can therefore have justifiable confidence that rates are going to remain attractive for the forseeable future, with the usual caveat that they can still rise very suddenly due to unforeseen circumstances.
Our message remains unchanged. There has rarely, if ever, been a better time to buy or sell than right now. The market is buoyant, buyer sentiment is high, sellers are motivated. Why wait? Call us today and get things underway.