Why Are Home Loan Interest Rates Rising?

Home mortgage rates are up from 2.5% in January to 4% in July 2015. 

Economists forecast rising interest rates on home loans in 2015, with rates reaching 5% by the end of the year.

Why are rates rising?

There are more than one reason why rates are rising.  Other investments are offering investors greater rates of return on their money, causing them to pull their funds away from the bond market that backs home mortgages.

The stock market is the primary investment pool that is attracting money away from the bond market.  Corporate profits are up, feeding higher dividends, and rising stock values.   Institutional investors that control large piles of money are pulling their money out of bonds and investing in stocks.

The pool of investors who remain in the bond market can command a higher interest rate for their money because there is less money to feed the market.  Issuers of bonds are offering higher rates of return to attract investors.

It's the classic example of supply and demand; The supply of money is down, demand is high, so suppliers can get higher rates of return.

Turning to home shoppers getting mortgage money.  I recently overheard a buyer crying woe is me over a 3.75% mortgage because his friend who bought in January got a 2.5% mortgage.  He cried, "I don't know if I can afford to buy if the rate goes much higher!"

Geez, I can remember people jumping up and down in celebration because rates dropped from 9% to 6%.  I bought my first home with a 14% FHA loan.

So in the grand scheme of things, a 4% mortgage is a BARGAIN that is worth grabbing now, before it goes to 5% or higher.

You can find out more about how much buying power you have at today's interest rates when you call Erick Blackwelder at 703-677-1120.

I would be happy to give you an over the phone estimate of your buying power.

Call now, 703-677-1120 and find out how much home you can afford.  You may be shocked when you find out how much buying power you have at your disposal.