Today’s Higgins Hot Topic: What’s Going On With Mortgage Rates?

Here’s the current scoop on mortgage rates from Kevin Kuechler, Vice President at MSA Mortgage, LLC in Woburn, MA.

Why haven’t mortgage rates gone up as predicted?

The answer is not straightforward, but basically rates are determined by the market for mortgage-backed securities. When demand for mortgage-backed securities is high, rates are low, and vice versa. During 2009 and until March of this year, the federal government was directly buying large amounts of these securities, thus keeping demand artificially high and rates low.  After the government’s program ended in March, experts expected rates to rise.

So then why are rates still staying low?

That’s complicated too, but there appears to be several possible factors:

- The government could be continuing to buy mortgage-backed securities, but indirectly, so we’re not hearing about it in the press.

- Non-government buyers of mortgage securities are buying more because there are few other places to invest money in a relatively low-risk way (now that mortgage-backed securities are truly lower risk).

- Investors who fear the current financial woes in places outside of the United States are buying more American securities.

Should I lock in my rate now?

Yes. With 30-year fixed rates still within shouting distance of all-time lows, this remains a great time to lock in a low rate, especially since it appears really unlikely that rates will go any lower in the short term.  They may go up, but it’s unlikely they will go lower. Even rates for some adjustable rate and 15-year fixed programs are flirting with historical lows.

For more detailed info on mortgages visit kevinkuechler.com.