Minneapolis, MN: Mortgage rates continue to creep higher, as the Fed has announced a plan to scale back their buying of mortgage backed securities.
What is causing rates to rise?
The Mortgage-backed-securities (MBS) market is what dictates loan pricing. Simply put, the government has been artificially holding down rates by buying billions of dollars worth of mortgage backed securities. The ideal is simply to stimulate the economy and job growth with cheap money. As the economy and job markets improve, the FED has said it would start to taper, then completely end their purchasing of mortgage bonds.
Without the FED buying bonds, fear has taken over. Fear is never in the markets favor, as one can clearly see in the run up of mortgage rates.
As many of you know, we are currently in round three of the Fed buying bonds. At the end of round one, when the Fed backed off of buying bonds, rates started moving higher, and quickly. At that time, the Fed quickly jumped back in to settle things down. We don’t see that happening this time around. As a matter of fact, the Fed has clearly noted that rising interest rates is something they want.
Actual Effect
The past two month, we have good from best execution 30-year fixed rates about 3.50%, to today, best execution 30-year fixed rates about 4.25%. That is the highest we’ve seen since late 2011. This is also the sharpest rise in rates in 10-years.
If you are even remotely thinking of refinancing, you’d better do it now. If you are thinking of buying a house in the very near term, you should do it now. If you are thinking of buying somewhere down the line, you are likely to see higher mortgage rates… But nothing that should ever stop anyone from buying a home.
For perspective, read this previous article of mine on mortgage rate history.
Should you float of lock? Read this daily rate lock advisory