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Health & Fitness

Ukraine Crisis Affects US Mortgage Rates

Thanks to President Vladamir Putin, his invasion of Ukraine may just keep mortgage rates low - for the moment.  According to Rob Clark at Preferred Home Mortgage (PHHL), the current crisis in Ukraine has caused a "flight to safety" which is adding support to US Treasuries and mortgage-backed securities (MBS).  A flight to safety unfolds when investors are more concerned about protecting themselves from risk than they are with making money.

During times of turbulence and uncertainty, investors will often move to investments where they are the least likely to experience a loss - typically bonds, and specifically US Treasuries (which are guaranteed by the US government) and MBS.  MBS have slightly more risk than Treasuries, but also have a better yield.  In other words, the flight to safety is an investor considering whether he or she feels comfortable taking a risk, or keeping the money safe right now.  When enough investors are deciding to minimize their risk, the result is a rally in Treasuries and MBS markets. That is what we are experiencing right now.

The short term effect on mortgage rates has been positive. This week is likely to see MBS continue to improve while the US and overseas stock markets struggle due to the Ukrainian crisis.  However, the US Treasury and MBS markets are overbought, and the technical indicators all point to a reversal that must occur.  This is not an "if" but a "when", so while it is ok to enjoy the improvements we are seeing, consumers should be prepared to act quickly at signs that it is turning around.  Once investors are more secure with the Ukrainian situation and bring an end to this flight to safety, we will see mortgage rates go higher.

If ever there was a time to purchase real estate, it is now.  Contact me if you would like to know more about your options.

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