Mortgage Rates: Becoming More Stable?

Wow…what a ride….

Mortgage interest rates appeared to level out and remain stable today after shooting up yesterday.  Yesterday’s increase was due mainly to investors putting their money into the stock market.  The Dow Jones Industrials broke thru the 9000 plateau for the first time since the beginning of the year.  Usually (not always the case) when the stock market does well, interest rates tend to rise because of supply and demand.  Investors are putting their money into the stock market so in order for the bond market to entice these investors to invest in bonds, they have to increase the interest rates therefore giving investors a larger yield on their money and return on their investments.  Often but not always the opposite also applies.  When the stock market is falling, investors are selling more stock than they are buying stock so interest rates are lower because investors are taking their money out of the stock market and investing into bonds, therefore more people are buying bonds so the yield or rate of return is lower because of more buyers.

The run up in the stock market yesterday was attributed mainly to investors applauding another upbeat reading on existing home sales. The National Association of Realtors said that its June reading on existing home sales rose 3.6% while sales came in at 4.89 million. Another morning of better-than-expected results helped give the indices a boost, including results from Ford (NYSE:F) and 3M (NYSE:MMM). Approximately five stocks rose for every one that fell on the NYSE.

It is great to hear our economy may be beginning to recover.  We all know it has been a tough couple of years and it will be very refreshing if we can start to see the light at the end of the tunnel.  It will be great to start and see home values holding steady if not actually increasing after months and months of decline.   It is great to see our equity in our properties increasing.

The down side to property values starting to increase is sale prices will also begin to rise.  This is great if you are a seller but not so great if you are in the market to buy a home.  The house you want to buy today may cost you more tomorrow.  We have been in a buyers market for quite a while now.  Borrowers were getting many great deals on home purchases not to mention also getting great, historically low interest rates and deals on the mortgages for the homes they are purchasing. 

As the economy starts to recover, your job may become more stable, your employment opportunities may increase, you will be able to sleep a lot better at night because you will also start to see your 401k’s and IRA’s start to regain some of the massive values they have lost during the last couple of years.  You will also hopefully be able to sleep better because you did not wait to refinance your higher interest rate mortgage into a much lower mortgage interest rate giving you more disposable income for you family needs.  Of course with all good news there may be some not so good results, purchase prices will start to rise, mortgage interest rates will start to rise, the house you want to buy today may cost you a lot more to purchase and also with regards to your monthly payment due to higher purchase prices and higher interest rates.

No one can predict the future, home prices may start to fall again, mortgage interest rates may stabilize or fall even lower. You have to decide if you want to want to take the chance of waiting to refinance or purchase a home or to take advantage of this incredible opportunity available now.  You have to decide if you want to look fate, look the future squarely in the eyes and tempt the future to oblige to your needs. If the economy is starting it’s recovery now and you decide not to act, you may have to deal with a hangover later.  For me personally, I do not like hangovers.