Mortgage rates are down to the lowest rates of the year, again. We are now hitting the best rates we saw last Spring in the midst of the refinance boom when the economy was still in free fall. Back then, from the beginning of the year until the start of the Summer, mortgage rates were in a flat, even pattern and the low rates were as stable as I have ever seen. By nature, mortgage rates are volatile. Mortgage rates aren’t set, but determined in a market (mortgage backed securities, a type of bond), just like with stocks or other financial instruments. Mortgage bonds bounce around from day to day based on economic reports and changes in trader sentiment. Mortgage bonds are long term investments, so the traders are looking for signs of inflation, which is the enemy of any fixed rate investment. Back in the Spring the big worry was deflation, not inflation, and the Fed had committed to a huge purchase of 1.25 trillion dollars in mortgage backed securities in order to keep mortgage interest rates low. The Fed purchases did the trick, and rates stayed in the low stable range until worries about the build up in public debt shook the market up at the end of May. We are in a very different situation now. The Fed is nearly finished with its buy back program, and with all the debt the government has taken on to keep the economy moving, inflation fears are high (even though there is no sign of inflation now).

The low rates earlier this year were much more understandable. A lot of experts now are shaking their heads and wondering why the rates have improved so much now, and whether these low rates will last. The saying is that bad news for the economy is good news for mortgage rates, but the economic reports coming in now are mixed. The stock market is still holding unto its gains and the dollar is weak, which usually means higher mortgage rates. It seems like there are 2 major reasons that rates are so good now:

1. The margin between mortgage backed securities and treasury bills is shrinking. Mortgage backed securities typically go in the same direction as the 10 year T Bill. US Treasury notes are considered the safest investment in the world, and since they are backed by the US government, there is no risk that the bonds won’t be repaid. With the margin shrinking, this means that investors are looking at mortgages as a safer investment than they considered it before.

2. Investors are finally convinced that the Fed intends to keep short term rates low for an extended time, so long term rates (like mortgages) have less upward pressure.

This is a real surprise that rates are this low now, but if you are able to refinance your mortgage and save up to hundreds of dollars a month, one more reason for Thanksgiving (I had to get that in somehow). If past history is a guide, the lowest rates won’t last long.  If you’ve been holding off for the right time to refinance your mortgage, this looks like the time to pull the trigger.

We offer every type of refinance including:

Conventional refinances including no cost mortgage refinances

DU Refi Plus and Obama refinance programs

FHA cash out and rate reduction mortgages

VA IRRL- Veterans Administration streamlined refinance

Jumbo refinances

Refinancing now isn’t as easy as it used to be. With property values down, home appraisals are coming in low and we require more documentation than we used to. But rates this low aren’t going to last forever. If you could benefit from refinancing your mortgage, give me a call and I’ll see what I can do to help you.

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