Why we see Mortgage Rates rising?
After reaching the lowest levels in decades, mortgage rates have shot higher over the past two weeks. After the Fed's official announcement on November 3, mortgage rates began to move higher for a variety of reasons. There are stronger than expected economic data causing investors to raise their outlook for economic growth, which generally leads to higher inflation. In addition, there was substantial opposition to the quantitative easing program from other countries and from many US politicians and economists, meaning that the Fed will face strong resistance to an expansion of the program. Investors had viewed the $600 billion initial level as a first step which would likely be increased in the future. Stronger economic growth and opposition to quantitative easing has reduced the likelihood that the program will be increased.
The recent news has not been uniformly negative for mortgage rates. Current inflation levels remain extremely low. In fact, the Consumer Price Index data released this week showed that annual core inflation dropped to a record low in October. The bottom line, when mortgage rates reached such extremely low levels, it has left them in a position to reverse direction very quickly (there is no place to go but up).
Due to the Thanksgiving holiday, all of this week's economic reports will come out before Thursday. Revisions to third quarter GDP and Existing Home Sales will be released on Tuesday. Durable Orders, New Home Sales, Personal Income, Consumer Sentiment, and the Fed Minutes from the November 3 meeting will come out on Wednesday. There will be Treasury auctions on Monday, Tuesday, and Wednesday. Mortgage markets will be closed on Thursday and will close early on Friday
If you have buyers sitting on the fence a rate increase may push them one way or the other…I always say a yes is as good as a no, it erases a maybe.
It’s time to write the maybe contracts…make it a yes.