Mortgage Rates Moving Downward

Mortgage rates improved today, even though most banks did not pass those savings so that we could provide these to the customers.  Currently, we are seeing the rates at their lowest point in over a month., hitting the lowest levels in more than a month. 

The stock market had an interesting day as it tried to see which direction it wanted to go before it settled into negative territory.  Is this the beginning of the major correction we have been looking for? Not yet, as stocks should hold about in the present area before the real damage is done later this year. It is important because unless stock indexes slip into a big down draft interest rates have little to no chance of working much lower. There is too much talk in the markets about a major correction.  Major moves usually are not telegraphed, thus rarely happen. When the thud hits it will be a big surprise with none of those preceding expectations. Another sign it is not about to roll over - a significant drop will chase that small investor away and markets have to suck every last drop out of investors’ wallets. Squawk box has been yapping about that the DJIA has not been down 11 straight days since back in 2011.

All that to say that investors buy bonds (which pushes rates lower) when they wish to avoid risk, or when they think that riskier investments will not perform as well.  The promise of new and simulative fiscal policies helped riskier assets (like stocks) outperform in the wake of the presidential election.  To whatever extent the ability of the new administration to effect policy change is called into question, investors will increasingly consider moving away from riskier assets and back into bonds.  The breakdown of the healthcare bill provides exactly that motivation.

In summary, with all the uncertainty in financial markets, it makes the absolute most sense to lock in your mortgage rate at application.  Today we are also benefiting from a mini rally in interest rates over the last two weeks.  It is impossible for anyone to call the direction of rates, locking in at these levels and securing your rate is the smart choice.  As always, only float if you will not lose sleep (or your loan!) if rates rise.