Mortgage rates fell on January 20, and naturally homebuyers have begun to ask whether they can go any lower. The average lender is somewhere in the “high 3 percent” range for 30-year fixed rate mortgages, with those on the lower end offering rates of 3.75 percent while backers on the high end of the scale are hovering around 3.875 percent.
The decrease brings rates to their lowest point in more than two months, and nearly as low as they were in April. This might come as a surprise to the average market follower, considering the rise in the Federal Interest Rate that was enacted during December. Still, weak performances from risk assets—such as stocks and oil—are having the opposite effect on safe-haven assets, including mortgage-backed securities, thanks to their low volatility. Investors are selling stock and moving to MBS. As a rule of thumb, whenever demand is high for MBS assets, mortgage rates will fall.
Buyers are never satisfied, of course, so the question remains whether rates can go down even lower. The jury is out, although some mortgage handlers are wary of staying overly optimistic.
“If there was ever a good day to lock, today looks to be it,” said Manny Gomes, a branch manager for Norcom Mortgage. “I may be putting my foot in my mouth by saying this but I do not see rates improving further in the next 30 days. Longer-term, I do see rates improving but if you are closing in 30 days or less, lock in and take all risk off the table.”
There is still promise that rates could improve further. If you’re searching for a mortgage and are willing to take the risk, it’s important to consider your options and make a plan for securing your rate. They could increase an incremental amount next week, but then rebound back to even lower levels. Set a limit for how high you’re willing to allow it to go before raising the white flag. When mortgage rates get to that level, go ahead and lock it in instead of waffling yourself into a significantly higher standard.