The 30-year fixed mortgage rate has dropped five points from last week, following the widespread crisis in Greece. According to Zillow Mortgages, the current rate is 3.88 percent. It rose to 3.97 percent on Wednesday and stayed there throughout the holiday weekend, then fell to the current rate early this week.
"Mortgage rates jumped last Wednesday after Greece defaulted on its international debts, then fell early this week due to continued Greek instability, turmoil in Chinese stock markets, and unexpectedly strong global oil supplies," said Erin Lantz, VP of mortgages at Zillow. "Uncertainty over Greece's future will continue to dominate headlines this week, but economic news elsewhere suggests interest rates will remain lower for longer."
The rate for a 15-year fixed home loan is currently 3.00 percent, while the rate for a 5-1 adjustable-rate mortgage (ARM) is 2.88 percent, according to Zillow. Zillow predicts tomorrow's seasonally adjusted Mortgage Bankers Association (MBA) Weekly Application Index will show purchase loan activity increased by 2 percent from the week before.
Yesterday, Dr. Rick Roque, managing director of retail at Michigan Mutual, told MReport that interest rates are at the focal point of this crisis in Greece in terms of how their vote will affect the U.S.
"The financial institutions have been pressing for higher interest rates, but the looming default crisis in Greece led investors to briefly seek safe haven in the credit markets last week, mainly Treasury and mortgage-backed securities,” Roque said. "The Federal Reserve has been clear: rates will rise regardless, and if a company's strategy is to hang on to weekly dips in rate, their refinance dependence is too high and the firm will be in trouble."
Roque also added that when Greece defaulted on its payment obligations with the IMF, mortgage interest rates decreased by one-quarter of 1 percent.
“On a $350,000 home, this would cost about $14,000 less over a 30 year period,” Roque said. “This, as we know, will be short-lived as European investors don't seem too nervous about a resolution. Equity markets rallied and over the last 2-3 business days while we were enjoying the 4th of July celebrations, the interest rate benefits have evaporated.”
Sanjeev Dahiwadkar, CEO and president of IndiSoft, also pointed out to MReport that there are varying viewpoints on how the “Greece Drama” is being looked at and although the U.S. impact may not be clear, it is still affecting the housing market.
"For the U.S., its stability of Europe that matters a lot more than single country," Dahiwadkar said. "Short term, there may not be direct visible impact on the U.S. mortgage market, but effects are already being reflected in sliding stock markets. The indirect investment that U.S. has in EU is going to see the impact. After all, Greece is just the beginning. Spain and other countries are already in line. Unless the damage is contained within next 90 days, we all will start seeing its effect here in our home turf. As the investments are sliding, mortgage rates are inching upwards and life in general. The worst impact on the U.S. is going happen more quickly out of falling China market than Greece."