Mortgage Rates and Hurricanes

It’s been a great week for mortgage rates here in Pocatello and Eastern Idaho.  We started the week at 6.25% on a 30-year fixed, 5% down payment conventional mortgage loan and are now ending the week at 6.00%.  A .25% drop is significant in and of itself, but it also gets us so close to interest rates in the 5%’s again.  It is also significant since we started the first of August with rates around 6.50%.  So hopefully this is a nice trend.

I believe the reason for this nice downward pressure on mortgage rates is due to the price of oil coming down.  Mortgage rates are tied to the bond market and the bond market hates anything inflationary.  High oil prices are definitely a risk for higher inflation, causing the bond market to react negatively.  In turn, so do mortgage rates.

An example of this was the aftermath of Hurricane Gustav.  There were fears the hurricane would wipe out or severely damage all the refineries and oil platforms along the Gulf of Mexico.  When the hurricane was not as bad as feared, the markets reacted positively assuming there would not be a negative affect on oil prices.  And thus, mortgage rates came down.

So pray for continued lower oil prices, and hurricanes that don’t pack a lot of punch.