The world runs on emotion. It’s the most efficient decision making system we humans have. It’s also the most dangerous. Emotions assimilate thousands of bits of data in a split second and distill it down to an action. The global money markets are no different…and you saw that this week. Once there is enough data to create fear, emotions take over. And computer programs have ‘fear’ as well because when a trigger point is reached, a market (or ‘sell at any price’) order is issued. ‘Sell at any price’ has fear written all over it. BUT the upside of this fear is the BOND market, which includes mortgages. The bond market benefitted as traders ran from the 1000 point drop and the concerns over Greece, Spain and Portugal and dumped their money into the US bond market for safety.
Remember, when investors are going to put their money in the bond market anyway, they will accept a lower interest rate because they need the safety. The result is that you and buyers benefit as rates drop. BUT IT’S TEMPORARY. Fears will subside AND the economy will improve. Just today the jobs report showed that non-farm payrolls have increased by 570,000 since December – that is VERY strong. As safety returns, money will flow out of bonds and rates will go back up. Better economic news will fuel inflation fears and that will trigger another emotional response that sends rates the other direction. So you should grab this tremendous opportunity before it’s gone.
There is plenty of State Bond Money out there so if you need assistance with a down payment we can grab this money with a contract. Call me if questions!!
This week rates ranged between 4.75% and 5.0%, depending on program, credit and points.
Sr. Loan Consultant