Home Mortgage Rate Update

May 5, 2011 in Mortgage & Financing - Leave a Comment

Bin Laden’s Death and European Debt Crisis = Good News for Mortgage Rates
May 5, 2011

One factor that may contribute to keeping rates low for now is the fear of potential retaliation from terrorist groups after the death of Osama bin Laden. The United States kept its official threat level unchanged after the al-Qaida leader was killed in a U.S. raid in Pakistan this week, but security at many airports and subways was heightened.

While the killing of bin Laden itself did not have a direct and immediate impact on rates, the threat of potential retaliation is likely to affect rates,
Any unexpected event, especially terrorism threats, tends to have a very deep impact on rates. It’s bad for the stock markets and good for the bond markets, and that normally leads to lower rates.

That’s because during times of political uncertainty, nervous investors tend to pull money out of riskier investments, such as the stock market, and seek safer investments such as Treasury bonds. The higher demand for bonds causes yields to drop. Mortgage rates normally follow bond yields.

Another international event that may influence mortgage rates in the United States is the Greek debt crisis,
Greece story is having the biggest impact, in driving investors into the U.S. bond market.
Greece received a bailout of $160 billion last year but continues to struggle with its debt, which represents about 150 percent of its gross domestic product.
Ireland and Portugal also are in deep financial trouble.

While the U.S. economy is bad, the U.S. debt is still perceived as a much safer investment than the debt of some European countries, Findlay says.

NATIONAL RATE SURVEY RESULTS
May 5, 2011 (Bankrate.com)

30-year Conventional:
4.88% — with avg. points: 0.35 pts

15-year Conventional:
4.05% — with avg. points: 0.35 pts

30-year FHA:
4.74% — with avg. points: 0.35 pts

5-year Conventional ARM:
3.56% — with avg. points: 0.35 pts

Thank you BankRate and Paul Soule of Coldwell Banker Home Loans.

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