Yesterday I touched briefly on whether or not rising mortgage rates would actually be good for the housing market. We may find out the answer to this question sooner rather than later. I noted that last week Zillow saw mortgage rates increasing in their weekly rates survey. Now Freddie Mac confirms this, finding the average rate on a 30 year fixed mortgage rose from the record low of 4.32 percent to 4.35 percent last week.
According to Freddie, this is the first time in 12 weeks that mortgage rates have increased. While I do not expect to see a drastic change in mortgage rates in the near future, stranger things have happened. The Federal Reserve has pledged to maintain its zero interest rate policy, so we are unlikely to see a policy-driven rate increase any time soon. However, it is entirely possible market conditions could drive rates in one direction or the other (if I knew which way they were going to go, I’d be sitting on a beach in a chair literally made out of money instead of at my desk, so your guess is as good as mine in that regard). The stock and bond markets have been unusually volatile of late, and something like an unfavorable/favorable economic report could easily swing the market pretty dramatically. 1 percent daily swings in the stock market have become fairly routine, as have 10+ basis point swings in 10-year bonds. A particularly good housing or jobs report could cause investors to reallocate assets from bonds to stocks, driving up the bond yields that largely determine mortgage rates.
Ultimately, it remains to be seen whether these increases in mortgage rates are just blips on the radar or the beginning of a trend. If it is the beginning of a trend, we could potentially see an increased number of mortgage refinances, and possibly increased numbers of home purchases as people scramble to lock in low rates. If rates go back down in a week or two weeks, nothing much will likely come of it. Stay tuned…
Loading ...
RSS feed for comments on this post.
Leave a comment