Ludlow, MA, January 25, 2016 – LUSO Federal Credit Union (www.lusofederal.com), a financial cooperative locally owned and operated by its members since 1971, comments on the recent stock market sell-off.
“The stock market sell-off was triggered by economic uncertainty in China, concerns about global growth, and geopolitical tensions in the Middle East,” says Jennifer M.G. Calheno, President and CEO of LUSO Federal Credit Union. “The broader U.S. stock markets have been in sharp decline since late December. The S&P 500 ended 2015 down 0.8% and, in the first eight trading days of 2016, has lost almost 6.0% of its value.” (Source: Spittler, J., “The Bear Market Has Arrived…Here’s What to Do,” Casey Research, January 14, 2016; https://www.caseyresearch.com/articles/the-bear-market-has-arrived-heres-what-to-do.)
Calheno explains that while falling stock valuations are bad news for investors, they have had a positive effect on mortgage interest rates. That’s because when stocks fall, investors turn to bonds, because they see them as safer investments. A stronger demand for bonds translates into lower yields, which mortgage rates track.
At the end of 2015 mortgage rates were at their highest level in nearly six months. Since the beginning of 2016 however, mortgage rates have fallen for two straight weeks. The average rate on a 30-year fixed-rate mortgage is around 3.92%, which is down from 3.97% at the beginning of the year. The rate is above the 3.66% average a year ago but is still much lower than the historic average of 6.0%. (Source: “Average US Rate on 30-Year Mortgage Falls to 3.92 Percent,” ABC News web site, January 14, 2016; http://abcnews.go.com/Business/wireStory/average-us-rate-30-year-mortgage-falls-392-36286575.)
“Declining mortgage rates in an environment where the Federal Reserve is raising its key lending rate has caught many first-time homebuyers and those looking to refinance off guard,” Calheno adds. “It’s also spurred many homebuyers to apply for loans. For the week ended January 8, mortgage applications, including refinancing, soared 21.3% from one week earlier.” (Source: Ahmad, A., “Mortgage Applications Increase in Latest MBA Weekly Survey,” Mortgage Bankers Association, January 13, 2016; https://www.mba.org/2016-press-releases/january/mortgage-applications-increase-in-latest-mba-weekly-survey.)
“With the U.S. economy showing signs of sustainable, long-term growth, and many expecting the stock market to rebound, now may be the last chance for potential homebuyers to lock in their fixed mortgages before interest rates start to rise,” Calheno states. “When it comes to getting the best mortgage products at the best rates, it’s important to find a lender who understands your short- and long-term financial and lifestyle needs.”
With mortgage rates expected to rise, Calheno also points out that now is the time to capitalize on the adjustable rate mortgage market, especially for those who are buying their first home or are looking to make a move in ten years or less. Most recently, the average rate on a five-year adjustable-rate mortgage fell to 3.01% from 3.09%. A year ago, a 5-year adjustable rate mortgage averaged 2.90%.
LUSO Federal Credit Union, is a member-owned, not-for-profit financial cooperative, providing many services, including checking accounts, savings accounts, mortgages, auto loans, refinancing and more with two Western Massachusetts branch locations in Ludlow and Wilbraham. More information about LUSO Federal Credit Union can be found at www.LusoFederal.com.