Mortgage Rates Stay Low Denver, CO - Mortgage Market Update by RJ Baxter
Are you a worrier? If so, you can understand the mindset of the markets right now. Traders are worried about the global economy and the possibility of a double-dip recession. The result of this worry? Low Mortgage Rates.
Let's look deeper at this. Worries about the stability of Europe have continued to weigh heavily on global markets, the US included. There is fear that governments could go into default and the result could be a chain reaction to other countries with dire consequences.
When something like this is threatening, investors flock to safe investments such as mortgage-backed securities (bonds). I read an article last week that world wide investors view US Treasuries as one of the safest investments in the world right now (scary??). The result has been a continued buying of MBS, and even with record auctions of fresh supply hitting the market, bond prices have not even blinked.
When bond prices rise (see chart), and buying pressure is strong, Mortgage Rates improve. Although Mortgage Rates ended the week slightly higher than the previous week, rates remain at near-record lows.
Despite this, mortgage applications for home purchases were reported in May at the lowest levels in 13 years, a sign that we could see a hangover effect after the home buyer tax credit wears off. This is a startling statistic with Mortgage Rates so low. Why are home buyer's hesitant? If you are on the fence, you may find an article I wrote for Zillow's Mortgages Unzipped blog interesting: Waiting to Buy a Home? It Could Cost You.
On the subject of the tax credit, it is rumored that the Home Buyer Tax Credit Will be Extended to September 30, 2010. The rumor is that buyers will not be able to enter into a new contract before then, but the extended deadline will allow those who are already under contract to close and take advantage of the credit.
This week brings important inflation readings which will be watched closely by the FOMC and Wall Street. Many are becoming worried about the possibility of coming inflation which will be a difficult thing to deal with as the economy attempts to recover and unemployment remains high. Inflation is bad for Mortgage Rates.
The FOMC has already begun heavy discussion about when they should start raising the Federal Funds Rate. Tightening of monetary policy is critical as the economy starts to rebound, but tightening too soon could throw us into a double-dip recession.
See Today's Colorado Mortgage Rates & find out more about getting a Colorado Home Loan
RJ Baxter First Mortgage Corp
Branch Manager
303-670-0137 (direct)
27902 Meadow Drive, Suite 120
Evergreen, Colorado 80439
