Mortgage interest rates continue to hover around all-time lows, and if the demand for the U.S. dollar continues, they could stay that way, financial experts predicted.
Leonard Baron, a consultant and lecturer at San Diego State University, pointed out the impossibility of trying to predict rates, cautioning that: "The world is full of potential events that could turn rates around on a dime. Imagine what might happen if Iran blocked the Strait of Hormuz or China stopped buying our debt."
Such global uncertainties, most recently exemplified by the debt crisis in Europe, have money managers looking for secure investments.
This "flight to safety" has precipitated heavy investment in the American dollar, mainly through Treasury notes. The demand for the notes has been a big part of how the Federal Reserve can keep interest rates low.
When demand causes the yield on T-bills to drop, investors often turn to mortgage-backed securities, which offer a little less safety than T-bills but often have a slightly better yield. MBS most closely influence mortgage interest rates.
"The trouble in Europe has actually been good for homebuyers," explained John Heithaus, chief marketing officer for Metropolitan Regional Information Systems. While the breakup of the European Union would be bad for everyone, the uncertainly about the EU's future as been a boon to some U.S. borrowers. "The flight to safety has kept our rates down," he said.
If this demand for the dollar continues, Heithaus added, the Fed probably will be able to continue low interest rates for some time.
But the problem is that the world is much more connected, Heithaus said.
"Everything moves so quickly that whatever happens elsewhere in the world can impact us immediately, and we can be affected by bad news as quickly as good."
This means interest rates and other economic measures that used to change a few times a week now can change several times a day, for better or worse.
Because interest rates and house prices are both so low, Baron said potential buyers should pay a little less attention to both and instead "concentrate on finding a really great property in your price range."