In an already struggling housing market, Minnesota mortgage industry watchers are looking for how interest rates will be affected following last week's downgrade of the U.S. government's credit rating.
The downgrade from Standard and Poor's shook Wall Street, as stocks declined Monday. But the uncertainty from the downgrade and fears about the European debt crisis have actually been good news for homebuyers this week, said mortgage industry expert Lee Jacobsohn.
U.S. Treasury securities still seem to be the safest investment around, Jacobsohn said, and a rush to buy bonds is pushing interest rates even lower, at least for now.
"If people are scared about other investments, whether in this country or in other countries, one of the places they go is they buy U.S. Treasury securities and that pushes those rates down, and most mortgage rates are tied at least in the short run to how Treasury Securities trade."
How long could these historically low mortgage rates last?
"This week is a good week to buy a house because interest rates are about the lowest they have been," Jacobsohn said.
With interest rates at just over 4 percent for a 30-year fixed-rate mortgage, buying a house is less than it was even a few months ago, said Diana Carter, chief financial officer at Summit Mortgage corporation. The company is the largest privately-held independent mortgage company in Minnesota, and operates in about 20 states.
"They'll have a better deal," Carter said. "(Currently) people are more concerned about the stock market than they are about the interest rates, and I don't think that by the S&P downgrading the U.S. debt that it is going to have much impact on the interest rates at all."
As skittishness subsides, interest rates will creep back up, Carter said. However, she notes that even if interest rates rise, mortgage rates would still be at historic lows.
The low rates have lured many first-time homebuyers into the market.
Those buyers are helping the housing market recover from the crash, said Brad Fisher, president of the Minneapolis Area Association of Realtors.
But rock bottom interest rates are unsustainable over the long term, he said.
There's no telling when mortgage rates will go up or how far they'll rise, Fisher said. But homebuyers with stable incomes and job security should take advantage of the low 30-year fixed rates now.