Anyone who is paying attention to the United States financial market has surely noticed that a new low in mortgage rates has just recently been reached. It has been a full 16 months since rates this low have been reached on the average 30-year fixed-rate mortgage market.
This is largely the result of concerns about the global economy sending large-scale investors into safety mode. As they withdraw from riskier endeavors and seek shelter under the safety of United States Treasury Bonds, rates fall, and American borrowers enjoy an easier time obtaining favorable mortgage rates.
The upshot of this news, naturally, is that American borrowers have a chance to spur growth by purchasing mortgage agreements and refinancing their homes and businesses. Anyone interested in borrowing has the perfect chance to enjoy a profitable loan that can earn them savings over the coming years.
Why Have Mortgage Rates Fallen?
Mortgage rates tend to move in relation to Treasury yields. These yields, as a result of the unease that investors are feeling about the state of the global market, have declined in the past two weeks. The 10-year Treasury rate, at 2.2 percent, is also at its lowest since June 2013, reflecting the fact that these two rates parallel each other closely.
The fact that there was a significant increase in rates in the year 2013, as investors prepared for the Federal Reserve to drop its bond-buying program, had major implications for the mortgage rate market at the time, raising the 3.6 percent rate of May 2013 to 4.75 only two months later. At the time, this was called the “Taper-Tantrum”, as the Federal Reserve announced it would taper its security purchases.
That jump in rates terminated a refinance wave that had begun in late 2008, when the Federal Reserve announced they would begin purchasing bonds. What we may be seeing now is the gradual return of this wave and its ripples making their way out to the many individuals caught off-guard by the sudden, sweeping boom in rates of the last year.
In this case, a number of other factors have combined to create the mortgage rate environment that we see today. The fact that a major industry player, the Pacific Investment Management Company, have lost their chief investment officer is only one element of a larger picture in which global investors are feeling concerned about their riskier ventures.
Are People Applying For Loans?
Applications for home purchase loans have declined by .03 percent, seasonally adjusted. This nearly neutral change in the number of home applications means that there may not be a better time to refinance your home.
The fact that these low rates have not yet been met with a correspondent wave in home loan applications means that, for many individuals, the time is right to begin the process that was cut short in its prime last year. Knowing that there is not yet visible growth in the mortgage and refinance market means that, for many, the time to apply is now.