Bin Laden’s Death and European Debt Crisis = Good News for Mortgage Rates
May 5, 2011

One factor that may contribute to keeping rates low for now is the fear of potential retaliation from terrorist groups after the death of Osama bin Laden. The United States kept its official threat level unchanged after the al-Qaida leader was killed in a U.S. raid in Pakistan this week, but security at many airports and subways was heightened.

While the killing of bin Laden itself did not have a direct and immediate impact on rates, the threat of potential retaliation is likely to affect rates,
Any unexpected event, especially terrorism threats, tends to have a very deep impact on rates. It’s bad for the stock markets and good for the bond markets, and that normally leads to lower rates.

That’s because during times of political uncertainty, nervous investors tend to pull money out of riskier investments, such as the stock market, and seek safer investments such as Treasury bonds. The higher demand for bonds causes yields to drop. Mortgage rates normally follow bond yields.

Another international event that may influence mortgage rates in the United States is the Greek debt crisis,
Greece story is having the biggest impact, in driving investors into the U.S. bond market.
Greece received a bailout of $160 billion last year but continues to struggle with its debt, which represents about 150 percent of its gross domestic product.
Ireland and Portugal also are in deep financial trouble.

While the U.S. economy is bad, the U.S. debt is still perceived as a much safer investment than the debt of some European countries, Findlay says.

NATIONAL RATE SURVEY RESULTS
May 5, 2011 (Bankrate.com)

30-year Conventional:
4.88% — with avg. points: 0.35 pts

15-year Conventional:
4.05% — with avg. points: 0.35 pts

30-year FHA:
4.74% — with avg. points: 0.35 pts

5-year Conventional ARM:
3.56% — with avg. points: 0.35 pts

Thank you BankRate and Paul Soule of Coldwell Banker Home Loans.

Here are the National Rate survey Results (10/01/2009)

30 year Conventional Loan: 5.25% w/ average points 0.31

15 year Conventional Loan: 4.64% w/ average points 0.31

30 year FHA Loan: 5.24% w/ average points 0.09

5 year Adjustable Rate Mortgage: 4.69% w/ average points 0.31

Will rates rise or remain relatively unchanged?
Industry experts give their insights;

• 29% of respondents expect rates to fall in the coming weeks
• 21& predict a further increase in mortgage rates
• 50% forecast that mortgage rates will remain more or less unchanged

In my market in Ocean City, where a significant number of the properties that I sell are second home or investment condominiums, we have a pretty fair amount of different loan products available to assist the buyer.

Right now some local lenders have great rates on a 5/1 ARM at 4%.

Let’s compare:

• $300,000 loan amount @ 4.375% is a monthly interest only payment of $1,094
• $300,000 loan amount @ 4% is a principal and interest payment of $1,432
• $300,000 loan amount @ 5.25% on a year year fixed monthly payment is $1,657

just a quick update to keep you posted.