Mortgae Rates Hit New Lows
Mortgage rates fell today as the European Central Bank looks increasingly ready for a new round of easing in June. More accommodative monetary policy in Europe makes European government debt more attractive. Germany is the benchmark for EU government debt and when demand rises, US Treasuries benefit as well. When demand for US Treasuries rises, the bonds that underlie the mortgage market also improve, resulting in lower rates. In short, there's a domino effect leading from anticipated easy money policies in Europe all the way to mortgage rates in the US.
Because they'll be the most direct beneficiary, European markets move the most at times like this. Treasuries move a bit less, and Mortgage rates a bit less than Treasuries. Even so, the improvement in bond markets was enough to push mortgage rates to new 2014 lows--also the best levels since October 2013. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios is now pushing 4.125%, with 4.25% still the solid benchmark.
Today is important in that it's the first clear instance of the broader US bond market breaking its contained 2014 range. For instance, 10yr Treasury yields hadn't been below 2.57 at all this year, but fell to 2.525 at their lowest levels today. While Treasuries don't dictate mortgage rates directly, their trends are almost always moving in the same direction. This big break from a longer sideways trend is a positive development in the bigger picture. It still makes sense for those with shorter-term time horizons to favor locking, but those following the market over the longer now have one less reason to abandon hope for mortgage rates to return below 4%.
In summary, if you held off locking then congratulations your gamble paid off. We've broken through the floor of the range we've been in for a while giving us a little bit of room to improve some more before we hit the next floor of a wider range. But, the environment still seems risky to me and locking rates for those on a shorter (less than 30 days) time frame still seems appropriate.
Because they'll be the most direct beneficiary, European markets move the most at times like this. Treasuries move a bit less, and Mortgage rates a bit less than Treasuries. Even so, the improvement in bond markets was enough to push mortgage rates to new 2014 lows--also the best levels since October 2013. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios is now pushing 4.125%, with 4.25% still the solid benchmark.
Today is important in that it's the first clear instance of the broader US bond market breaking its contained 2014 range. For instance, 10yr Treasury yields hadn't been below 2.57 at all this year, but fell to 2.525 at their lowest levels today. While Treasuries don't dictate mortgage rates directly, their trends are almost always moving in the same direction. This big break from a longer sideways trend is a positive development in the bigger picture. It still makes sense for those with shorter-term time horizons to favor locking, but those following the market over the longer now have one less reason to abandon hope for mortgage rates to return below 4%.
In summary, if you held off locking then congratulations your gamble paid off. We've broken through the floor of the range we've been in for a while giving us a little bit of room to improve some more before we hit the next floor of a wider range. But, the environment still seems risky to me and locking rates for those on a shorter (less than 30 days) time frame still seems appropriate.
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