Generally speaking, the last two decades have witnessed mortgage rates that fluctuate opposite the general economy. When the stock market is strong, inflation is low and employment levels are high, the mortgage rates were a fair 7% to 9% rate. When things go bad, such as in the past 8 years, rates drop to unseen levels.
However, recent economic activity has been a mixed bag. On one hand, more people are back to work. The jobs report for the past two months is showing signs that the unemployment levels are trending down. That is a very positive sign since increased employment usually leads to more retail activity, more home construction and more home loans.
On the other hand, hurricane Sandy has left a huge mark on the Northeast part of the country. The stock market was closed down for at least 36 hours, leading to some companies to lose money. Also, the storm has caused an estimated $50 billion in various types of damages to commercial and residential areas.
General Effects of the Hurricane through the Bond Market
Money that is used to provide funds for mortgages typically comes from bonds. The purchase and sale of bonds through the markets is what causes the fluctuation levels of the mortgage interest rates. Since the bond market closed early and remained close for an extended period of time, there was no activity; no sales and no purchases. Therefore, the rates did not move as a direct result of no activity.
Current Trends Will Likely Lead to Increased Rates
Current job reports have been very good. The amount of new jobs for October 2012 was 37% better than expected. Coupled with the fact that employment rates have risen over the last 25 months and it is clear that the economy as a whole is improving. More people at work is good for all businesses. This improved confidence and growth in available income will help spur more companies into the black once again.
As the general economy improves most analysts expect mortgage rates to increase slightly. This means that the time for refinancing is now. Taking advantage of the great rates across all types of loans makes it possible for many homeowners to save money not just in the monthly payments but also in the long term interest they would have paid on their mortgage.