There is still some leftover love for mortgage consumers after Valentine’s Day, with mortgage interest rates remaining relatively low this week — especially for 15-year mortgages.
By and large, the opportunity for getting a mortgage rate less than 5% is declining, but you can still get a very good loan between 5% and 5.25%. That’s assuming a strong credit rating (700 or more), a steady income and at least 20% down in most cases.
For the week, mortgage rates meandered about, held back slightly by a spate of lower-demand Treasury auctions. But that bit of bad news was offset by a rise in stocks of 200 points on the Dow Jones Industrial Average from Feb. 9 to Feb. 12.
Longer-term, a consensus seems to be forming around the direction of long-term interest rates, which most economists agree are set to go higher as 2010 plays out. Certainly, the Federal Reserve’s March exit strategy from the mortgage securities market has something to do with that mindset. The Fed has pumped $1.3 trillion into the private mortgage market, thus creating an “artificial demand” that kept interest rates low. But by withdrawing from the market, the Fed is sending a clear signal to the mortgage securities market that it’s on its own.
With less government money pouring into mortgage securities, demand decreases and interest rates rise to attract more buyers. That’s the landscape we’re looking at right now and most bond market observers fully expect that to come to pass this spring.