Encore! Record Low Rates Return for a Second Show

This article is written by Jay Garvens and Joey Connell

extra-extraFrom spring of 2012 until the fall of 2013, it was difficult to find a mortgage product that wasn’t in the 3% range. This was a period of historically low rates, with some borrowers able to refinance in the high-2% range. Throughout the following winter and spring, however, rates started trending upward. Most industry experts believed the time of 3% mortgage had passed, with 4-5% mortgages as the new normal. Over the last couple weeks, though, rates have been trending back downward, and we are again seeing mortgages in the 3% range. The question is: What happened?
For several years, interest rates have been reacting almost exclusively to the Fed’s bond-buying program, known as QE. The Fed has signaled for several months that they would begin tapering their bond purchases, and as economic indicators improved over the last year, investors believed tapering was imminent. This drove interest rates up. However, the Fed has yet to initiate an aggressive tapering policy, reducing their bond purchases by only 25% a month from $85 billion to $65 billion.
This, coupled with weak and dismal economic news over the last two quarters, has caused rates to trend back down. The Fed has lost confidence that the economy has recovered. They consider the anemic growth in durable goods (.5%), the artificially low unemployment rate, and the housing market losing steam over the last quarter after double-digit gains earlier in the year.
As quickly as the economy stalled, it could easily pick back up. There is no telling how long this period of extraordinarily low rates will persist, so the time to act on this news is now! Recent economic developments, while leaning negative, have offered some positive news; the signals are mixed. Any negative indicators may be aberrations in the data, and future economic news could show a brighter picture, thus driving rates back up. As it stands, though, negative news dominates our economic outlook, particularly in the housing industry.
During the second half of 2013, both rates and home prices increased dramatically. By the end, many buyers—particularly young buyers—were priced out of the market. Real estate investors limited their purchases, causing demand to fall. House prices have remained essentially flat ever since.
These developments have had a severe impact on mortgage rates. But what does this mean to you? Right now, it means record low rates! A conventional 30 year fixed rate at 3.875% with no original points. It means a VA or FHA loan as low as 3.625%. It means a conventional 15 year fixed at 3.125%. With the rapid increase in housing prices throughout 2013, it also means many people who did not have the equity to refinance during the last period of historically low rates may now be able to; their homes may finally have the equity needed. This is especially urgent for anyone who presently has an interest-only or adjustable rate mortgage. These products were very popular in 2004 and 2005, and many are set to either re-adjust or recast in 2014 and 2015 into far more expensive products.
One of the most common regrets I encounter from callers to my radio show is missing the historically low rates of 2013. Many either dragged their feet and missed their opportunity, or didn’t have the equity necessary to refinance. Whatever your excuse, don’t make the same mistake twice. This is a second chance that nobody anticipated. Don’t squander this opportunity! Whether you want to refinance to a lower rate, pay off debt, purchase a new home, or purchase an investment property, now is the time to act.

Company NMLS ID # 1591 (www.nmlsconsumeraccess.org); CO–Mortgage Company Registration, Churchill Mortgage Corporation, 104 S Cascade Ave. Ste. 201A, Colorado Springs CO 80903-5102, Tel 888-562-6200, Regulated by the Division of Real Estate
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