So two weeks ago, we were all concerned about the national debt ceiling and if it wasn't addressed, what would happen to interest rates. Then Congress passed a bill to increase the debt ceiling and cut the federal budget. Last week S&P came out and lowered our country's credit rating to AA+. Again over the weekend, no one was quite sure what would happen to interest rates or the stock market. When the market opened on Monday, the stock market took another huge hit. Tuesday there was a rebound, but Wednesday the stock market fell again.
During all of this, mortgage interest rates have fallen!! No one really was sure how the bond market would react after the increase in the debt ceiling and many people locked in their interest rates the week before the debt ceiling increase due to the uncertainty. In the last week, we have seen interest rates drop to some of the lowest levels ever. FHA mortgages have rates around 4%, conventional 30 yr mortgages are slightly higher than that. Your individual rate will vary based on your credit score, mortgage amount, mortgage type and how long you need to lock your rate for.
Tuesday, the Federal Reserve met and their announcement after the meeting stated that they intended to keep interest rates low until 2013. Until now, they had not put a date on that statement. The Federal Reserve does not set mortgage rates. Mortgage interest rates are set by the market and global conditions can affect those rates. The reason mortgage rates have dropped is concern over the financial issues in Europe, the economy here and even with the credit rating drop, US treasury bonds are still one of the safest havens for investors. As the bond market sees increases in money (people buying bonds), prices rise and the yield (rates) drops.
What all this means for consumers is that mortgage interest rates are very low! How long they will stay there, no one really knows. If you are thinking about buying a home, now is a fantastic time to buy! Not only are rates low, but home prices are also low. If you are thinking about refinancing your current mortgage, it is also a great time! The biggest issue to those looking at refinancing will be the value of your home. If the value is there and you plan to be in the home for a few years, it is a great time to refinance!
