The Future of Mortgage Rates – What are the possible causes of increasing mortgage interest rates
In light of the presidential Elections: what is the Current Mortgage Interest Market and where is it heading?
With the new president elect forming his national and international policies many potential buyers (as well as current sellers) are worried about the threat of rising mortgage interest rates.
We are currently experiencing historically low interest rates so this discussion on rising rates has been ongoing for quite some time now. The election of a new President has only brought along more speculation on what his future policies will do to interest rates.
For many potential buyers the main question now is: will I wait or quickly close in on the existing rates? Some buyers might even be nervous to take this big step at all.
Although mortgage rates are still historically low they are crossing from the 3% range into the 4% range. Last Friday buyers with a 30-year contract rate went from 3.35% to 3.85% in barely a week. This means a significant rise in monthly expenses which makes some buyers all of a sudden unqualified for a loan they would have been qualified for about a week ago.
For those who want to get more insight into interest rates and to be better able to anticipate future interest rate changes the below is a must read.
There are three factors that might have contributed to the sharp rise in interest rates.
What are the three possible reasons for rising interest rates.
- Prospects for a better economy. The prospect of increased federal spending on infrastructure and tax cuts promised by the new President Elect provided promising signs for businesses while stocks became more attractive. Many investors lost their bonds in favor of stocks, which suddenly looked more prosperous. Interest rates (loosely) follow the yield of the US 10 year treasury bonds. Bonds have seen a decrease in price since the announcement of the new president, which has led to a sharp increase in interest rates.
- More Inflation. The expected boost in economic growth based on President Elect Trump’s future policies has also increased the likelihood of future inflation. Interest rates are composed of several charges among which the expected inflation rate. With inflation in mind, interest rates are likely to rise.
- Increased Pace of Increased Federal Reserve Interest Rates The expected December rate hike of the Federal Reserve. This probability is now so high that many interest rates have risen by more than the FED is likely to raise its rates.
Will this trend last longer?
It is hard to tell what the market will be doing exactly. Until March 2017 when the future Trump administration will release policies, tax reform plans and budgets is it hard for anyone to tell where the market will be going next.
Still want to buy a house – take this advice
Mortgage lenders cannot lock in a rate until you have an executed contract. Best advice one can give if you looking to buy is to lock in your rate as soon as possible, but allow your mortgage agreement to correct the rate on your agreement if the rates do drop below what you originally agreed.