How World Events Impact Mortgage Rates

by

blog-author-clayjeffreys3

What do protests in the Ukraine/Thailand/Venezuela, the Crimea dispute, and poor economic news from China have in common? In some way, shape, form or fashion, they impact mortgage rates.

“How” this happens is the better question.

A general rule of thumb with interest rates is this… When there is negative/bad news (poor economic outlook, rumor of war, unrest), mortgage rates tend to improve while stocks lose value. When there is positive/good news (good economic outlooks, increased hiring, resolution to unrest), mortgage rates tend to get worse while stocks gain value.

Notice I used the words like “general” and “tend” in the previous paragraph. With the events over the past several weeks, volatility and inconsistency reign supreme. Let’s look at some examples:

– On March 13, 2014 – China released economic news that continues to show a slow down in their economy. Meanwhile back at the Crimea Peninsula, Russian troops were conducting war games/exercises.

The result? The Dow lost well over 200 points, while mortgage bonds had one of their larger single day increases of 2014. These negative events/news stories helped interest rates improve.

– On March 17, 2014 – It is announced that Crimea has voted to join Russia. This lead to the Ukraine and Western countries threatening sanctions, Russia stating its support for the move, and a tenuous situation becomes increasingly complex and strained.

The results? The Dow endured further losses? Nope. Quite the opposite. The Dow had gains of almost 200 points with today’s futures showing even more gains. Typically, news like this would hurt stocks and help rates, but interest rates worsened on Monday.

The markets seem to be currently reacting to events in unexpected ways. This makes forecasting the direction of mortgage rates more difficult than normal.

How should you respond if you are in the market for a new loan? I have two ways:

1. Lock and Shop: go ahead and lock an interest rate for an extended time without having a home under contract. Once you find a home and are within 30 days of closing, you can then use a float down if interest rates are better than your original lock.
2. Rate Float Down: whether or not you use the Lock and Shop program, should interest rates improve by 0.250% or more from your original rate lock, you can float down to the current rate for free. There is no fee to use this feature. The float down can be used once you are within 30 days of closing and prior to 7 days before closing.

Using either of these programs gives you the best of both worlds… should interest rates get worse, your rate is locked! Should interest rates improve by 0.250% or more, you can still float down to the lower interest rate. This protects you regardless of what happens with the latest US jobs report, or economic outlooks in emerging markets, or the latest events in Crimea… your rate is protected.

To learn more about the free Float Down or the Lock and Shop program, contact me today. I can help you protect your rate now even if you haven’t found the home of your dreams.

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2 Responses to “How World Events Impact Mortgage Rates”

  1. It’s no joke! | The Mortgage Blog Says:

    […] recently posted to this blog, world events impact interest rates. When the Feds announced the tapering plan, China and other […]

  2. Interest rates still ignoring impact of tapering | The Mortgage Blog Says:

    […] previous post on this blog detailed some of the reasons behind this. World events that can destabilize economies, poor […]

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