The Fed's attempt to keep mortgage rates low is failing.

As discussed in Tuesdays team meeting, we all know mortgage rates are artificially low dues to our government influence, but the activity over the past two days may signal the beginning to higher mortgage rates in the very near future.

 

Yesterday afternoon and again today, mortgage rates were pushed significantly higher by about one half a percent. This is an extremely large jump in a very short amount of time which means rates in the 4’s are off the table at least for the foreseeable future.

 

A $417K 30 Year Fixed loan was at 4.5% first thing Tuesday morning and today it is slightly over 5%.

Rates are rising, and when they do they rise fast.  At this point the majority of negative news being reported is not having much downward pressure on interest rates.

The 10 Year Treasury, which although does not have a direct correlation to mortgage rates, it is a very good indicator, is rising very fast.  In the last 14 days the 10 YR has risen 40 basis points from 3.10 to 3.50.

We have seen mortgage rates rising as well, although they have not yet risen the same amount as the 10YR, at least not yet.  Mortgage rates have risen .5% and at the present time there is no sign of that increases will slow.

The Fed's attempt to keep interest rates low is failing.  The Fed continues to purchase treasuries as they had announced many months ago however the market seems to be placing much more weight on the fact that consumer confidence is rising and corporate profits are stabilizing. Basically, from an investment standpoint, corporate bonds with their higher returns are beginning to look more favorable than mortgage bonds at all time lows.

It was announced yesterday that consumer confidence rose the most it has in 6 years.  The stock market rallied, and the 10 YR treasury along with the mortgage backed securities tanked.  In addition, although housing still is a sore spot in the economy, it is no longer the anchor on the economy that it has been in the past 2 years.

Remember, history has shown us that interest rates always rise much faster than they fall, and we once again are seeing history repeat itself.

Now is the time to talk to those buyers who are trying to time the market, their money has just gotten a little more expensive. It also helps to bring a little perspective to the table. In 2000, a Conforming 30 year fixed loan was at 7.5% so a rate today at under 6% is still a great deal.

Please feel free to contact us if you have any questions,

TurnKey Mortgage Solutions