The devastating effects of the quake and tsunami on the island of Japan will be felt for years and perhaps decades by the local populace. As Japan has the 3rd largest GDP, it’s economy and the global economy will feel the effects of this disaster in the short and long term.
When seeing the videos and pictures of the massive destruction, it seems unfathomable to me that such a thing could occur. But unfortunately it is very real. Monday was the first day of trading on the Nikkei which promptly fell over 6%. Cost estimates for the cleanup and repairs are running over 1/2 trillion USD. This number could be wildly inaccurate and not on the high side.
US stock markets opened lower and the traditional flight to safety to US Gov’t debt was in force yesterday and continues today. The yield on the 10 year Treasury dropped to 3.347% from 3.39% on Friday. This helped improve mortgage interest rates again. Rates have been dropping for the past few days.
Overnight the Nikkei plunged over 10%. The Dow futures are down over 240 points this morning and the 10 year treasury yields have dropped to 3.23%. Stock markets around the world have plunged.
The scope of the disaster has yet to be determined and the potential for meltdowns at the nuclear facilities has not yet passed. The Japanese auto and electronic manufacturers are seeking ways to bring production back on line, however, they may have to move this to other parts of the country. The mixed blessing is that Japan’s economy has been slack for the past decade and therefore has plenty of excess capacity. These moves will be less expensive than if their economy was humming and there was no space for expansion or relocation. Still it will take months for the production to be back online.
In the US, we have our own items to consider with respect to interest rates. The FED is having its meeting today. At the FOMC it was anticipated by some that the FED would change language reflecting an improved economy and would signal that at some point it would raise rates. Now however, with the anticipated global economic shock, the FED most likely will leave the language the same. There are risks to the economy, unemployment is way too high and the jobs being created are mostly lower paying service jobs.
So what does this mean for mortgage rates? In the short term rates should stay low. We know our economy is improving. This improvement in the economy will eventually mean that rates need to rise in order to prevent an inflationary cycle. Prior to the tsunami I was expecting rates to hit about 6% by years end. Now however, we may see short period of where rates drop back into the mid-fours for Fannie and Freddie Loans. FHA rate should be similar, albeit with increase costs for the consumer after April 15 when the upfront mortgage insurance premium increases to 1.15% for LTVs over 95%.
Yesterday’s Best Execution for well qualified borrowers for FHA was 4.75%. Best Execution for conventional loans was about 4.875. Today’s rate sheets will be better, the question is how much, because we just don’t know how long this flight to safety will continue for US treasuries.
My advice is is that if you missed the refi boom, you may have one more shot so call your loan officer and see where rates are today for tomorrow they may be higher.
I can be reached by cell @ 508-254-2645 or e-mail me at dgaffin@GreenParkmortgage.com.
The Japan Quake and Aftermath – Impact on Mortgage Rates
The devastating effects of the quake and tsunami on the island of Japan will be felt for years and perhaps decades by the local populace. As Japan has the 3rd largest GDP, it’s economy and the global economy will feel the effects of this disaster in the short and long term.
When seeing the videos and pictures of the massive destruction, it seems unfathomable to me that such a thing could occur. But unfortunately it is very real. Monday was the first day of trading on the Nikkei which promptly fell over 6%. Cost estimates for the cleanup and repairs are running over 1/2 trillion USD. This number could be wildly inaccurate and not on the high side.
US stock markets opened lower and the traditional flight to safety to US Gov’t debt was in force yesterday and continues today. The yield on the 10 year Treasury dropped to 3.347% from 3.39% on Friday. This helped improve mortgage interest rates again. Rates have been dropping for the past few days.
Overnight the Nikkei plunged over 10%. The Dow futures are down over 240 points this morning and the 10 year treasury yields have dropped to 3.23%. Stock markets around the world have plunged.
The scope of the disaster has yet to be determined and the potential for meltdowns at the nuclear facilities has not yet passed. The Japanese auto and electronic manufacturers are seeking ways to bring production back on line, however, they may have to move this to other parts of the country. The mixed blessing is that Japan’s economy has been slack for the past decade and therefore has plenty of excess capacity. These moves will be less expensive than if their economy was humming and there was no space for expansion or relocation. Still it will take months for the production to be back online.
In the US, we have our own items to consider with respect to interest rates. The FED is having its meeting today. At the FOMC it was anticipated by some that the FED would change language reflecting an improved economy and would signal that at some point it would raise rates. Now however, with the anticipated global economic shock, the FED most likely will leave the language the same. There are risks to the economy, unemployment is way too high and the jobs being created are mostly lower paying service jobs.
So what does this mean for mortgage rates? In the short term rates should stay low. We know our economy is improving. This improvement in the economy will eventually mean that rates need to rise in order to prevent an inflationary cycle. Prior to the tsunami I was expecting rates to hit about 6% by years end. Now however, we may see short period of where rates drop back into the mid-fours for Fannie and Freddie Loans. FHA rate should be similar, albeit with increase costs for the consumer after April 15 when the upfront mortgage insurance premium increases to 1.15% for LTVs over 95%.
Yesterday’s Best Execution for well qualified borrowers for FHA was 4.75%. Best Execution for conventional loans was about 4.875. Today’s rate sheets will be better, the question is how much, because we just don’t know how long this flight to safety will continue for US treasuries.
My advice is is that if you missed the refi boom, you may have one more shot so call your loan officer and see where rates are today for tomorrow they may be higher.
I can be reached by cell @ 508-254-2645 or e-mail me at dgaffin@GreenParkmortgage.com.