Today’s headline arises out of the reading I’ve been doing on how to increase the effective reach of a blog. They recommend headlines like this that catch people’s eyes.
I saw an ad yesterday headlined “One Weird Trick To Pay Your Mortgage Off FAST!” It turned out they were recommending refinancing using a HARP loan. That is weird – refinance to a lower interest rate and make your mortgage payments? Who would have guessed that would work?
That’s it for my daily rant.
The smartest minds in the room, however, are indeed predicting another short move down in interest rates, and I think you should know about it. Remember, the smartest minds in the room were predicting nothing but an inexorable rise in mortgage rates all this year, so keep that in mind.
What’s going on? I won’t go into the history (again) but the bottom line today is that even though the Feds are tapering off their QE3 purchases, there are so few mortgage being written that even with less money competing to buy the mortgage-backed securities, there are far fewer mortgage to be bought by investors than what economists had predicted.
Add to that the world’s recent troubles – the Israeli-Palestinian conflict, the trouble in the Ukraine, this week’s worries in Portugal – and many investors the world over are seeking the relative safety of secure investments in the United States.
More money chasing finite investment opportunities means lower yields; their yield is your interest rate.
As you have read in this column interest rates stayed in a small range for most of this year until the end of May, when they broker through a tight range to the down side.
They have stayed below that range since, long enough now to have established a new trading range. Analysts now believe they will stay low, and probably move lower still.
Procrastination almost never pays off. Almost.
From HSH Associates, here’s the most detailed and specific forecast that you are likely to see:
“We remain in an unusual and uncertain time for interest rates. The forces of the domestic economy are trying to push them higher; global economic and political troubles are trying to press them lower. It seems unlikely that one force will clearly win out against the other during the forecast period, but the struggle may intensify somewhat. These “push-me, pull-you” kind of market forces suggest a continuation of rangebound activity, and while we think there’s a little more upward bias for rates, we will be adjusting our forecast ranges down somewhat to reflect the new (if temporary) reality.
For the next nine-week period we think that HSH’s Fixed-Rate Mortgage Indicator (FRMI) probably gets no lower than 4.10%, and tops out at not more than 4.50%. Given the overall 5/1 ARM’s continuing lack of movement, it seems likely to us that a 2.95% to 3.20% range is what we will find when it’s all over, and for conforming 30-year FRMs, we think that you can expect a 4.125% to 4.5% pair of fences.
This forecast expires in mid-late August. Summer, now just starting, will be quickly drawing to a close at that point. If your vacation plans or hectic back-to-school schedule permits, why not drop back and see how this all turns out?”
We’ve notice purchase activity picking up, and another drop in rates is likely to boost refinance activity a bit, so that combination will probably work its way into higher interest rates sooner rather than later. But for now, enjoy another gift from the market.
Casey Fleming, Author of The Loan Guide: How to Get the Best Possible Mortgage (On Amazon)
Mortgage Advisor, C2 Financial Corp
NMLS 344375 / BRE 00889527
For those who want really serious detail: HSH Associates