Fixed mortgage rates fell to the lowest level in six decades for the second straight week, according to new figures compiled by Freddie Mac. But, rates may be reversing course. The yield on the 10-year bond rose Wednesday and was up sharply early Thursday to 2.09% as European leaders and central banks appeared more ready to address the ongoing debt crisis by making loans available in dollars.
Remember, the Freddie Mac average looks in the rear view mirror and by the time the average is reported some other event has shaped or changed the interest rate environment. If you are considering a lower rate start investigating your possibilities. Call me for a free, no obligation consultation.
Two other events were reported that caught my eye:
- “Overall foreign holdings of US debt fell for only the second time in more than two years, a sign that some investors worried about a possible default.”
- “Americans’ wealth fell this spring for the first time in a year. Falling stocks and investments made many slightly poorer, a trend that worsened this summer.”
Mortgage rates tend to drop in the face of bad news or more importantly, in the perception that bond traders have of coming bad news.
While many forecast rising rates as a result of the possible US default, the exact opposite happened. Seeing that there was this vast interest in US debt led me to believe the United States, of all countries was the least likely to default.
The second issue presents the more important challenge as consumers are being counted on to lead us out of this current economic dilemma. I have heard many business owners say they won’t be hiring until there is greater demand from buyers (i.e. consumers). If we don’t feel as wealthy as we would like to the tendency is to put potential purchases on hold.
We’ll get through this. We have to be patient and learn to live within our means. We must protect our credit scores by paying our obligations on time. We can’t throw gas on the fire to put it out. There will be a period of adjustment and I believe that will entail debt destruction.