Tuesday, November 15, 2016
By Admin

In retrospect, it was perhaps inevitable that financial markets would react to the election result last week, regardless of who won.

After an immediate downward reaction to the result, stock markets quickly rallied, which caused bonds, a safe-haven investment when stocks are unattractive, to suddenly become less appealing.

A side-effect has been for mortgage rates, which are closely linked to the demand for bonds, to rise in the past few days.

Of course we cannot, and should not, pretend that this is anything but unwelcome news if you're currently buying a home. However, it is perhaps a good time for us all to pause, ignore some of the more exaggerated news headlines, and take a slightly longer term view as to what might be happening here.

As we've been saying in this blog throughout 2016, and actually long before then, ultra-low mortgage rates can be said to have been riding their luck for a very, very long time indeed and a correction is arguably very overdue. Whenever it's looked like they are about to steadily rise something has happened, either at home or abroad, or both, to keep them in check.

And while it isn't good news that we've seen rates start to rise in a way that hasn't been seen for some considerable time, benchmark 30 year home fixed rate loan interest is today at 3.73% (according to Bankrate.com) - still amazing value.

If we travel back in time almost exactly a year, many experts were predicting a rise in rates this year to somewhere between 4.5% and 4.65%. So, while the very recent current trend is in the ascendency, we still have a very long way to go before these very well considered, and thus far wildly inaccurate, predictions are matched.

The reality is that, while it's disappointing to see a more definite, albeit short-lived thus far, upward climb, borrowing money to purchase a home is still, without question, at a very low interest rate level on an historic scale.

The issue is, of course, that we have all gotten very used to mortgage rates heading further and further South and, naturally enough, short-term confidence can be adversely affected when things start to go in the opposite direction.

Step back from the day-to-day and week-to-week comparisons, however, and you can see that we are still at 30 year rates below 4%.

There will naturally be some sort of immediate reaction in the market, indeed mortgage applications have fallen by 1.2% from last week, according to the Mortgage Bankers Association. That said, it is maybe the wrong question to ask when, or rather if, rates will once again return to a downward spiral towards 3.5%. Put simply, no-one knows.

Instead, there is much to be said for taking the position that right now is still a great time to be able to lock-in a mortgage rate that is historically low, rather than gambling on what might, or might not, happen in future.

And if recent history in mortgage rates has taught us anything, it's to remain in the here and now and take the view that financing a home has rarely been more affordable than it still is today!

As always, you should seek professional advice in these matters before making a decision. Why not click here to get the ball rolling.

 

 

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