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Mortgage Rates Jump – Get Used to Higher Rates

Written by Clay S. on . Posted in Rate Updates

30 year Fixed Mortgage Rates have jumped 1.00% – 1.375% or so since beginning of May and show no signs of backing off  … We need to get used to higher mortgage rates … mortgagerates Fed Chairman – Ben Bernanke –is at the center of the a wild ride on the markets announcing a pullback in the Fed’s purchase of mortgage-backed securities as part of “quantitative easing” in his June 19 announcement, causing a spike in interest rates. In his next speech he backpedaled saying the employment situation wasn’t as good as the data might imply. For example the percentage of would be wage earners is the lowest on record – only 63% of working age people are actually looking for work. I think a surprise is how much influence the Fed has on the mortgage-backed securities market and the absence of interest from private investors to step in. After a positive employment report on July 5 … The bond market dropped 180 points!  That is a massive change in the market, exaggerated a bit because trading was thin on the holiday week.  Prices have recovered somewhat since then but we still are more than one percent higher in rates compared to early May. The red bars in the bond chart are bad news for rates, and you can see the slide the market has been on. What to do?  Get used to slightly higher rates.  Also the alternative of a five or seven year ARM loan should be considered if the fixed period matches the holding period for your property. clay signature black


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