After a sharp turn for the worst over the past couple weeks, rates have improved and evened out. The costs aren’t quite as dirt cheap, but they are much more favorable than we have seen in recent weeks.
Last week, we explained why rates have worsened and where they will go in the future. Here is the LINK. If you missed it, here are the basics:
Rates have increased due to a sell off in the bond market. Currently, there is more supply than demand. When the bond market drops, rates increase. So why the excess supply and lack of demand?
- The economy has improved. As a result, investors feel more confident and are leaving the relative “safe haven” of U.S. Treasuries and putting money into equities.
- The Treasury sold off the last of its mortgage backed securities. This final sell off has resulted in excess supply in the market, and there isn’t enough demand to cover, thus dropping prices and increasing yields.
- Banks are selling off bonds to show better Q1 profits.
As a result of all this movement rate costs increased by about a point (and a quarter in some cases). Are the days of dirt cheap rates over? We think not. Rising gas prices should put pressure on the economic recovery, and we expect money to move back into the bond market, thus moving rates downward. But be patient – rates are always slower to move down (rather than up).
As a result of this movement, rates are moving up from all-time lows. Last week, the Tribune posted an article that reported the national average of the 30-year fixed is above 4.000 percent. Here on the Central Coast, we are offering mortgage rates that are still well below this national average. It is still a perfect time to buy or refinance and save on monthly interest payments.
If you would like to learn more about current interest rates and what current costs mean for your loan, give us a call: 805.543.LOAN.