Good morning,
Interest rates have held pretty consistently again this week and that has led to a few interesting conversations over the past week or so. As I had mentioned (as well as almost everyone else) a while back, the Federal Reserve has started reducing their Quantitative Easing (or bond purchasing program), which was an is keeping rates lower than they would be without this help.
It ends up being a basic supply and demand. When large numbers of homeowners and homebuyers are taking out mortgages or refinancing, the sheer volume of those loans being packaged and sold as mortgage bonds enters the market and invariably raises interest rates. The Federal Reserve has been offsetting this event by purchasing the excess out of the market. With the Federal Reserve lowering the amount they are purchasing, eventually we will see rates go up as long as refinance and purchase loan volume continues to add to the market.
The main reason rates have not risen sky high? Loan Volume is down, or not nearly as many people are buying homes or refinancing homes as they were this summer and fall and this is completely typical through the winter and holiday seasons.
Think of this as a temporary reprieve. In the spring, the housing market will gain steam with more and more people selling and buying homes. As this happens across the country, we will get to a point again where the market will be overwrought with Mortgage Backed Securities that are not being purchased, raising interest rates.
No one can say how quickly, but one thing is certain. There will come a time when rates move up at a quicker pace than they are currently. Now is a great time to buy a new home before rates and home prices rise for the peak season.
Have a great week!
Matt
Rates: 30 year fixed at 4.5% (APR 4565) and the 15 year at 3.50% (APR 3.747), FHA: 4.125% (APR 6.179): As always rates change with individual credit scenarios and programs, APRs are estimated based off of a $250,000 purchase price with 20% down and a 740 credit score, if you want an exact quote, call. These are not quotes, merely a baseline measure to gauge how rates change from week to week.
Matt Royer
Mortgage Consultant, CMC | Homes Mortgage
NMLS# 366970
612-232-7646 c I 651-770-0637 o I 651-294-1001 f
www.MattRoyer.com
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