The downgrade by S&P earlier this month helped to cause a major stock market correction along with the ire of millions of Americans. It is quite obvious that The US economy is not good; Fannie and Freddie are in poor shape, and jobs are still in despair.
The question is : What did S&P hope to accomplish? Moody’s and Fitch both left the top rating intact, so was this a publicity magnet? Why not downgrade the Us Postal Service next? They are in serious financial trouble as are many states.
Regardless of what their intent to accomplish may have been, let’s look at what it did accomplish. First, stocks tanked, and then regained what was lost within a week only to lose it again the end of this week. Now, poor manufacturing, housing and jobs numbers all contributed as well as continued Eurozone data, so S&P is not wholly to blame.
What is interesting is that stocks and mortgage rates usually work in opposite perspectives. If stocks do well, mortgage rates usually worsen. Fundamentally, money leaves the safety of treasuries and chases the gains in stocks. When stocks retreat, investors flee back to the safety of bonds.
Since the downgrade, this has not held true. Stocks experienced wild swings but rates not only held, they actually improved. In June, many wondered if the 10-year bond would ever dip below 3% again, especially with QE2 ending. PIMCO, the largest bond fund in the world bet against it. Last week, it went below 2%. To put in perspective: imagine a gallon of gas going to $2.00—that is how shocking it is! Inflation, the arch-enemy of bonds, has made a comeback recently and mortgage rates simply ignored and even rallied against.
Many are out refinancing again, which will help the economy. If you have a loan now that is over the conventional loan limits, act quickly as October 1st, the temporary higher loan limits expire leaving only jumbo rates for those borrowers. If you are paying a rate in the high 4% range on a 30 year or low 4% range on a 15 year or have an adjustable rate loan now, you really should inquire about today’s rates. WE are working extended hours to help and we are still able to settle quickly since we process, underwrite and close from our office rather than ship your file to some fulfillment center out of state as most banks and lenders do.
A recent study attempted to demonstrate how it is less costly to own rather than rent in 74% of the country. Yet, home sales are still tepid at best. I guess the moral of the story is that low rates may help, but until jobs and confidence return, it may be a longer drought that desired. If you are able to take advantage of low rates, jump on it! Imagine the lines at a gas station offering $2 a gallon today. At current mortgage rates, the lines should be just as long for borrowing.
Loading ...
