Wether you know it or not, mortgage rates are closely tied to the Treasury Bond yields. Specifically the 10yr note. Why? Cause (qualified[not sub prime])loans are securitized by packaging them into mortgage back securities. A bond. Exception is ARM which are basically tied to either the Prime rate(for HELOC) or the 52 wks LIBOR rate.
So foreign buyers have been buying up our bonds therefore instituting demand, leads to lower yields (since price has an inverse relation to yields). Why are they doing this?? 1) Due to currency exchange rates. Dollar being down against most currencies makes those countries monies go further. Incidentllay this causes investments to US compnaies more popular and tourism rises as well. So a weak dollar is not all that bad. Within reasons. 2) Our Feds raising of the rates. Compared to their own countries bond rates, we are still higher. 3) The biggest of all......SAFETY.....we have the biggest and most politically and GNP stable economy out there.
So who do we need to thank for our mortgage rates??
The Brits....yes the Brits. A report published by Bloomberg this morning shows that in Nov 2005 the UK owned 35.3 Billion of US Treasuries. It dropped in Dec to 11.3 Billion. Mainland China picking up the slack in Dec 2005 by upping their holding of US Treasury bonds from 2.2Bil to 6.9billion. Japan comes in third place @ 2.2 billion in Dec of 2005. Israel comes 4th @ 1.8 billion
Seems France don't like and got rid of their US Treasury bond holding altogether in Dec. Same with Canada, Mexico and OPEC
OPEC owned 3.9Bill of our Treasury bonds in Nov of 2005. Not really sure how to analyze that.
Just thought you guys would like to know. So those that have just gotten a fixed rate within the past 6 months. Thank a Brit.
Not only do they help us in wars, they give us a hand in houses too. Indirectly of course