Yesterday morning, I read an interesting and timely blog post from HSH Associates, “Economy sends mortgage rates down to new 2011 lows.” What struck me most was how on target this particular blog was about the confusion of mortgage rates and the recent downgrade of the US economy by Standard and Poors.

All of the recent news hitting the media airwaves is telling us that a downgrade should, in theory; result in higher mortgage rates as investors demand higher returns. However, that is not the case. As the aforementioned blog post so perfectly states:

“…the one factor that has seemingly been a mainstay in keeping mortgage rates historically low for the last few years now has been and still is the fragile economic situation, both here and overseas.”

We are now a global economy.  There are even more concerns about what is happening in Europe, considering the financial issues that Italy, Spain and Portugal are facing. Bad economic news, including what is happening globally, makes investors choose between their options. Right now, the economic issues are keeping rates at artificial lows.

So, what is needed for a real increase in interest rates?  Sustained good economic news is the real key to increasing interest rates and that is something that would be actually a good thing for all of us. The other factor is inflation which is also being watched. Unfortunately, inflation has not made an impact as of yet for mortgage rates.

What does this mean overall?   With rates at historic lows once again, now is the time to consider your mortgage options whether refinancing or purchasing.

By Chris Cope