Good afternoon all! I hope you're well. A little over a month ago, I blogged about mortgage rates increasing drastically in the space of a few days. They literally went from 4.75% for a 30 year fixed mortgage O.A.C. to 5.5%. The reasoning seemed to be that the government stopped guaranteeing the purchase of mortgage backed securities. Thus, the sudden rise in rates.
Fast forward to today. Rates today are at 5% for a 30 year fixed conventional mortgage which is actually 1/8 point worse than yesterday. So rates have improved again. Expect continued volatility as the markets (especially oil) try and find their medium. My apologies to Kathy Toth who commented here. She asked me for an update the following week after I blogged about rates rising in late May. I thought mortgage interest rates might come back down fairly soon. In reality, it took a little over a month.
So what happened? Why the sudden downtick in rates? The big news was the economy where things didn't appear to be recovering as quickly as the pundits hoped. Once again, the stock market is off and oil prices have plunged by $10/barrel as of today. My company recently had Barry Habib (many of you may know him as one of the foremost mortgage analysts in the country) in for lunch and he predicted that mortgage interest rates may go back down to what we got used to this past Spring (think close to 4.5% for a 30 year fixed). Granted, Barry has been wrong and admits it. But I do agree with him about the fundamentals.
So...hold on to your hats! I think we may see lower rates again. But this will probably be the last time. As Barry Habib said, our worst enemy is inflation. And that's probably going to rear it's ugly head sometime next year. To combat that, the Federal Reserve will probably raise short-term borrowing rates to combat that. Yes, I know this doesn't have anything necessarily to do with mortgage interest rates (they're determined by the price of the 10 year treasury note) but if the economy starts recovering, look for mortgage interest rates to rise. I personally expect rates close to 7% or above a year from now. I will keep you posted. Those of us in the business would frankly like a little more stability but that's the nature of the game right now! Take care.
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