Interest Rates Are On The Move
On Wednesday, June 19th, the Federal Open Market Committee met and released to the markets their intentions to limit their $85 Billion a month subsidy of interest rates. Since that date mortgage backed securities have risen approximately one-percent causing a selloff in the stock market and disruption to buyers wanting to purchase or refinance.
The chart below is a 38 year history of the 30 year fixed rate mortgage average in the United States. Coincidently, I started my career in the mortgage business 38 years ago so I have personally experienced the effects of the ups and downs of the interest rates on this chart. In 1981, I personally had a 15.25% mortgage and thought it was a good deal at the time. After all, rates were 17.5%
Look at 2003 to 2008 and you will see, during the boom years of the housing bubble, interest rates were in the 6% range. From 2009 to now you can see how rates declined due to the Federal Reserve Board easing to assist with the housing crisis. As the housing market continues to recover over 2014 and 2015 interest rates will return back to the 5% to 6% range as the subsidy is removed from the system.
While we have experienced historical lows in interest rates over the last 3 years, it’s hard to say in a relative terms, interest rates are bad, when you review this chart.
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