Mortgage Rates Hold the Line -- For Now
August 10, 2009
Somewhat surprisingly, mortgage rates held the line and even declined slightly last week, despite a steep rise in bond market interest rates.
Mortgages and bonds have some characteristics in common -- they are long-term, interest-based commitments -- and thus tend to respond to the same market forces. Those forces include demand for capital and inflation. With the optimism that has driven the stock market higher in recent weeks, both demand for capital and inflation are expected to be on the rise. Oil prices have risen, and ten-year bond rates climbed 35 basis points in just the first week of August.
Mortgage rates, on the other hand, held the line. 30-year mortgage rates actually declined slightly last week, from 5.25% to 5.22%. If you have reason to be shopping for a mortgage -- either to purchase a home or refinance your existing loan -- don't take those mortgage rates for granted. A look at the history of mortgage rates will tell you that these low rates are not just rare, they were actually unprecedented prior to this year. With multiple signs that the economy is picking up, you can't expect mortgage rates to ignore the market environment for long. Logic dictates that they will follow bond rates upward before too long. Anyone who hesitates at this time might find themselves in the near future looking back at this as a tremendous missed opportunity.
