Mortgage rates shifted higher almost a year ago, at a time when bond market investors thought the Federal Reserve was preparing to end its policies supporting low rates. But that anxiety has subsided, and rates have stabilized since then.
In fact, turmoil in the stock and currency markets earlier this year caused rates to drop. Investors across the world tend to buy U.S. Treasury bonds whenever concerns come to the forefront.
Worries about the economic stability of emerging market countries in recent months have encouraged investors to move into safer U.S. Treasuries. Greater demand for Treasury bonds results in lower rates.
That’s why rates have been falling this year for American homebuyers. Mortgage rates are directly tied to movements in the Treasury bond market.
It’s impossible to predict what the value of stocks or bonds will be in the future. We also can’t forecast how mortgage rates will move in coming months.
But we do know that rates have been kept at artificially-low levels for some time due to aggressive action by the Federal Reserve. As America’s economy regains momentum, these measures will be withdrawn and rates will naturally rise.
Policymakers use low rates to encourage economic activity. Companies are more likely to invest in new equipment when they can borrow on great terms. Consumers also start thinking about purchasing a home when they know they’ll benefit from affordable payments.
Rates will continue fluctuating, and it’s expected that stronger economic expansion in the future will reduce Fed activity. At that point rates will move to a higher plateau.
Sometimes we don’t realize how good things are until conditions have changed for the worse. Rates have been low for so long that it’s easy to overlook the positive reasons for buying real estate now.
But today you still have the opportunity to gain home financing at rates near all-time lows. And buying with a long-term mortgage lets you lock in current rates for as long as you live in your home.