record low rates

How Low Can Mortgage Rates Go?

As surprising as it seems, mortgage rates are nearing lows not seen in over 40 years.  Many home owners used the month of August to lock in at a great rate.  But this is the start of a new month.  Will September bring the unthinkable mortgage low of below 4%?  Many potential borrowers are wondering and so is the mortgage industry.

The first week of April brought with it the start of the mortgage rate decline.  The rate has been steadily declining since that point.  This was unexpected as many lenders and investors believed that the rate would have gone up once the fed stopped purchasing mortgage backed securities in March.

The rates continuing to decline is not a fluke.  There are many reasons behind this.  Obviously, the economy has had an effect on the rates.  Many investors are concerned with the current state of the US economy that they are purchasing more Treasury bonds which in turn lowers those yields.

In turn, these investors purchasing these mortgage-backed securities are requesting higher yields from Fannie, Freddie and the FHA to justify their risk.  The rising yield is dropping mortgage rates further. 

So where will rates go from here?  If the economy takes another hit from inflation – rates will rise because lenders will try to make up from the hit they will take from the value of real estate investment they expect to lose.  The Federal Reserve does not see inflation as a potential problem and they announced in August that they’ll hold the federal fund rate at this historic low and continue to buy Treasurys, which surged at month end, to help try to stimulate the economy.

Another factor is that investors don’t think that the economy is recovering, but rather another recession will hit causing rates to drop even further.  So borrowers that are playing the waiting game could very well see the rate drop below 4% and could end up saving thousands of dollars in their monthly mortgage payment. 

If you would like to take advantage of these record low rates either by financing or buying your next dream home, contact GSF Mortgage in Aurora today!