The drop in mortgage rates in May just goes to show you how unpredictable markets can be. Nearly all the "experts" were expecting for mortgage rates to start heading higher this month given the fact that the US Treasury ended its program to buy mortgage-backed securities in April.
For a few days, rates did rise. Then, rather suddenly, some events occurred - including the "flash crash" and concerns over Greek bonds and the sustainability of the Euro - which had everyone scurrying to buy all the Treasuries they could get their hands on. The correlation between Treasury rates and mortgage rates is not perfect, but is definitely strong. Here at the end of May we are seeing mortgage rates back down to some of the lowest in 25 years. I am getting notices from lenders of rates at 4.75% on standard 30-year mortgages and hovering just a notch above 4% on 15-year loans.
Refinancing on the rise, purchase applications fall:
As happens when rates take a significant drop, refinancing applications had double digit percentage increases. The more troublesome statistic, however, is that new purchase applications have fallen from previous weeks. That fall off was expected, at least partly, given the end of the home buyer tax credit. Nevertheless, with such a significant drop in rates one would hope that purchase applications would be stable and signal that there are still home buyers out there looking to take advantage of lower prices.
While we obviously can't predict what the future holds, there is some likelihood that what we've experienced this past month is somewhat temporary and that rates will begin to head upwards sometime later this year. It may be worth a look to determine if you can take advantage of the rates as they are now. One place to start is to check these rate monitors and refinance calculators: