First Time Home Buyers
We cheated. Admittedly. After years of weekly mortgage rate predictions on Mondays, our track record is pretty good. This week we were blindsided and it delayed this week’s predictions.
Last week saw higher rates on FHA, conventional, and adjustable rates–everything ticked higher. Volcanic ash cleared the air and it looked, at least for a bit, like there was a resolution to the Greek “issue.” By “issue” we are referring to the fact that they completely violated the EU provisions for budget deficits and kept this well-masked…for a while. Greece is not exactly good at getting accurate tax returns from its citizens and it is even worse at relaying accurate budgets to its fellow EU members.
Monday and Tuesday of this week were too volatile. Great news for mortgage rate shoppers, awful news for all things Euro. Greece was downgraded to junk yesterday. It is difficult to run at a deficit on junk bond rates and they’re now up to 9-10% yields. Europe is pondering two options right now: Bad & Worse. At present, Worse has the edge.
In the past two days, we’ve seen massive rallies in the mortgage bond market as money surges out of Europe in search of safer investments. Add to it a pull-back in the stock market and it explains much of why mortgage rates staged a rally yesterday.
Mortgage Rate Predictions: Three Volatile Days Remain
Heading into the week, today should have been the volatile day as the Fed adjourns from one of its 8 scheduled meetings for the year. It doesn’t stop there. Tomorrow we get Initial Unemployment Claims data and then GDP and consumer confidence hits on Friday.
On their own, these items would be a full week’s worth of data. But it doesn’t end there. Greece isn’t solved and Ireland, Portugal, and Spain are all hanging on by a thread. Here’s Credit Crunch 101: When Lehman Brothers collapsed, banks became afraid of lending to each other overnight as no one knew how much of each other’s balance sheets were locked up in bad securities. When banks won’t even lend to each other overnight, they don’t lend to consumers and they don’t lend to businesses.
Well, here’s the bad news in Europe: They have more sovereign debt in their banking system than we had in subprime loans. Our credit crunch could be nothing compared to what they are facing now. We went through a painful process in 2008-2009 to unlock a frozen banking system and purge the toxic assets from the system.
Rates are pushing back to 5% on the fixed, whether it is FHA v. Conventional, the numbers are roughly similar. The 5/1 ARM is below 4%.
Rates are low. Very low. At the present, the safest move remains locking a loan. There remain marginal opportunities to see rates dip lower, but not much. If Greece & Friends gets a little worse, rates might go a little lower. If it gets better, rates skyrocket.
In volatile times, a fixed rate can be a great option. In extremely volatile times, locking that loan now can be the best option.
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