Why Interest Rates are Rising

By
Mortgage and Lending with Fitzgerald Financial, a Division of Monarch Bank

From the Desk of Bob Caldwell

Why Rates Are Rising

Several weeks ago we spoke about the reasons interest rates have been on an uptrend for the most part this year. The first thing we want to make clear is that the reasons have not changed. However, because we experienced a downtrend for a few weeks in the midst of the uptrend, there is reason for additional analysis in this regard. What were these reasons? There were basically three. Rates were bouncing back from ridiculously low levels reached at the end of last year when the economy slowed down and the budget crisis threatened to shut down the government completely. Secondly, the economy seemed to be bouncing back from the pause of late last year. Thirdly, the Federal Reserve Board was making noise about ending their purchases of Mortgage Backed Securities and an ending date for stimulus activity known as Quantitative Easing (QE).

The next question is--why did the rising trend stop? It appeared that the economy was not bouncing back from the pause as quickly as we thought. Weak data included the employment report for March and there was continued negative news from Europe and elsewhere overseas. Now, several weeks of rates drifting back down has been erased in a matter of days in the wake of a stronger employment report for April and continued strong data from the real estate markets. The additional perspective? For one, the employment reports are being watched closely and we have another report which will be released on Friday. Obviously, this report has the ability to turn the markets in either direction with a surprise in the data. Secondly, we can see that rates have become very volatile. Volatility is indicative of a market which has hit bottom. The conclusion? While we can't tell you where rates will go from here, all along we have indicated that record low rates would end and when they do, we will get no warning. Our advice is this--don't focus where rates will go, but focus on where rates are. They are still historically low and if you want to borrow money to finance a house, car or business--now is the time to get it done.

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"From the Desk of Bob Caldwell" Blog, Copyright 2013 Bob Caldwell

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Bob Caldwell

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