As a mortgage loan officer, I am pretty good at answering the question, “What are rates going to do?” My normal reply is to say something like, “they are going to change.” Because rates do actually change all day, every day, just like the Stock Market.
Of course, whoever is asking me that question really wants to know if they are going to get a better deal by waiting. There’s no Crystal Ball, and there’s not any sure fire way to know. HOWEVER, here are my personal thoughts about what’s happening with the Economy right now, and what you might see in the next few months prior to the Election.
In General… “Bad News in the Economy is Good New for Mortgage Interest Rates.” I work in a sadistic business, while I don’t want ANYONE to be out of work, the “bad” jobs numbers recently sent mortgage rates to an all time low. I tell folks it’s like the “Hospital – business is good when everybody is sick!”
The European Union and The Second Mortgage
Over the weekend the European Banks decided to accept a future request from Spain that would, essentially “bail out” Spain. Is this good news, or bad news? In the short run, it’s probably good news – but in the long term (and I’m thinking weeks here not years) it could turn out to be pretty bad news. Think about having a first mortgage on your house, that’s pretty much what the EU said it would do with it’s “bail out.” They will loan Spain some money, and put a lien against it. Most Economist, looking at the money coming in, and the money going out on the Spanish Books (just like your household Debt to Income Ratio) would tell you that they still won’t have enough coming in to make all of their payments… so they will need more.
Here’s the problem for Spain… if they go to “private sector” (meaning they go to a BANK for more money), they are, in essence, getting a second mortgage. If the Foreclosure Problems in the US have taught us anything, it’s that second mortgages are NOT a priority. In NC, they are getting “stripped” from homes (meaning the Bank is getting ZERO dollars for their investment) when there’s a Bankruptcy.
So if you are a Bank, that has had, and seen, this sort of second mortgage situation play out (read: you’ve lost money on second mortgages, lots of it) … would YOU want to be a second mortgage holder behind the European Union? Realizing, of course that the EU is essentially also the “Judge” and has the ability to change the law??? Me either!
European Union and The 5 Other Countries With Problems
The problems in The European Union involve multiple Countries that have been referred to as the P-I-I-G-S (Portugal, Italy, Ireland, Greece and Spain). The fact that these countries are in “trouble” is not new news.
According to Alan Greenspan, the issue is that when the European Union was formed, the assumption was that the “Mediterranean” Countries would change their culture to be more like Germany. That didn’t happen. This is about a ten minute interview that Greenspan did with CNBC to answer the questions about what we should be doing in our country and what the European Union should do. The first 3 minutes address the issues in the European Union, Spain and what could happen with the Greek Vote coming up.
So just to be clear, 10yr yields have kicked off the week’s trading nearly 10bps higher (currently in the 1.71’s) after an event over the weekend produced largely “as-expected” results. Furthermore, the announcement only stated that Spain WILL make a request and that the Eurogroup is “willing to respond favorably to such a request,” but that the final amount hasn’t been determined and the formal request won’t occur until later in the month. That’s a lot of market movement for what is essentially a “back-patting get-together” that produced the concrete result of “good intentions.”
When the Jobs Numbers came in “under” what was expected on June 1st, and the news that Spain would in fact need some money came on the same day… the 10 year dropped to 1.46. THAT was the day to lock! We are in a trading range. We will likely see other days where “BAD NEWS” hits the market, and mortgage rates will fall. The next “bad thing” to watch for? Greek’s Vote to accept the EU sanctions, or go it on their own.
If you have questions about getting the BEST mortgage Interest rates, call Steve Thorne 919 649 5058. We work where we do, because we have today’s best mortgage rates in Raleigh, or anywhere else in North Carolina!
I try and answer all questions :)