Take Advantage of This Gift While It Lasts
We mentioned the drop in mortgage rates. The drop was meaningful, with rates falling by as much as 10 basis points on some mortgage products.
So what was the impetus for the rate reduction?
Uncertainty was the most-repeated explanation. You may have read about the election chaos in Italy, which appeared to send institutional money to the havens of U.S. Treasury and agency mortgage-backed securities. The rush of money to these securities, in turn, lowered their yield and thus lowered the rate on many mortgage products.
At the same time, it's been reported that many investors are nervous over the impending “sequester”, where unless Congress acts, $85 billion in spending cuts will take effect automatically. These nervous investors are also purported to have sought refuge in the same securities as the investors nervous over the Italian elections.
To be sure, investors might be nervous about Italy and how Congress will compromise on the sequester, but it's becoming more apparent that financial markets are tiring of fear and crisis. More investors today are simply responding to the political crisis du jour with a shrug.
More investor indifference suggests that today's low mortgage rates might be a temporary gift. And if not, there is still little incentive for mortgage rates to fall much lower. Therefore, we think it would prudent for borrowers to take the gift as it is now presented instead of holding out for a better one.
Courtesy of Jessica Regan.
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