How does the Greek financial crisis affect my home loan in Los Angeles?
The world markets are tricky and volatile. What happens in Greece has a direct impact on the U.S. housing market. If you had been following interest rates on the 30-year fixed mortgage over the same time as the financial crises in Greece, you would have noticed that rates went down, as the uncertainty of the Greek economy created fear in the world market. The fear was that if Greece defaulted on their debt obligations to the European Union, it would weaken the European economy.
Investors looking for a safe harbor for their money move their assets into the U.S. They are looking for the best place to park their money to avoid losses. This is called a flight to safety. When the investors buy sovereign debt in the form of U.S. bonds, specifically the 10-year treasury, Interest rates have a strong tendency to go down.
The reverse is true, as Europe appears to be more stable, the investors will move money away from the U.S. Market, and rates will go back up. This is true with other countries as well, for example, China or the Middle East. In fact, Geo’s world politics and world economics have more to do with how much you pay for your home than The Federal Reserve.
What is good for the stock market is not always good for the bond market. You should know and be aware of trends in the bond market. It could save you tens of thousands of dollars over time. Interest Rates move up and down very quickly, and a one-point increase in long-term rates will cost you hundreds of dollars more per month, and thousands over years.
The best way to predict interest rates is to follow the yield on the 10-year treasury. As it goes up and down so too does the rate you pay on your home loan. Remember a lower interest rate is much more important than the actual price you pay for your home. The odds of you keeping your home for 30 years are slim. It’s all about the payment.
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