If you’ve been waiting to pull the trigger on a new house purchase or a refinance and you’re waiting for an interest rate you may get your wish over the course of the next couple of weeks. That said that’s not without some potential risk you otherwise might incur by waiting for what may or may not come.
If interest rates move by .375% to .5% on average that translates on most loan amounts somewhere between $60-$85 per month. If $60 to $85 a month is enough for you to sway your decision to refinance or to purchase when you already might be getting a benefit based on current market interest rates than waiting may be possibly better, but the risk is giving up the current savings or the benefit today for what might not ever come down the line. The reality of it is waiting for a lower interest rates is a fool’s game if there’s already a net tangible benefit for you to take out a mortgage today. The reality of it is no one truly knows what’s going to happen with mortgage rates. All we have is yesterday news which is at best a remote indicator for the future.
Here is what generally happens from beginning of November through January of the New Year. During this time of year as a precursor to Christmas leading up to Thanksgiving with Black Friday, retail sales data, consumer optimism, and Fortune 500 companies gearing up to maximize profits at the end of the year to appease shareholders. These events usually come in the form of rallying stock market and for a stock market to rally, that must come from the liquidation of something which is the bond market.
When this event transpires and the stock market rallies, mortgage bonds (fixed-income securities) sell-off driving the yields down and their rates to the consumers up while the stock market performs. When we receive negative economic information the opposite happens and people sell off their stocks and they move their money into something where they can get a longer return on their money and that place is the fixed-income market bond market driving the yields up and the rates to consumers on mortgage down.
Presently, we have the lowest unemployment in the history of the United States. This is acting as support for investors on Wall Street continuing to pour their money into the stock market as a result that is not spelling good news for the future of mortgage rates. However, at this time we also have impeachment proceedings and the impeachment proceedings can be construed as bad news by the markets because this is perceived as bad economic news because President Trump is pro-capitalism in which the stock markets thrive on. As a result, it is possible rates could get lower in the coming weeks by .25-.375 (maybe) if the news is perceived as negative by the markets. It’s very 50/50 at this point.
So, what do you do? Most mortgage companies have a policy where they will let you either float down or renegotiate the interest rate with the investor if mortgage rates drop in the process. This might be something to look for when selecting a quality mortgage company to handle your home financing. Talk to someone who is experienced (hint it is not the big online lenders). The other things that you might want to think about doing is getting your loan process started, getting your appraisal ordered, and locking your rate when Market timing warrants doing so, this is a little bit risky because you’re taking the gamble with your future cost of funds for what may or may not transpire in the economy versus locking in something right now which otherwise offers an exceptionally low rate given current bond market yields.
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