This week could turn out to be the last straw of mortgage rates holding below 4%. We knew that rates couldn’t stay this low forever and at some point the Pied Piper would come calling. Some industry insiders are saying the piper finally “came round” yesterday. One thing is for certain, we can no longer take these rates for granted, especially because they have actually been in an interest rate up-trend since November 2012, but recent lows in April disguised this fact.
In the past week, the average 30 Year Fixed rate (0 pts) has gone from 3.5% to 3.875%, an increase of .375%. In similar fashion, the 10 year treasury yield has increased from 1.64% to 2.04% in less than 30 days, nearly a 25% increase!
According to Mortgage News Daily, yesterday was the single largest rate increase in one day since 2010. Click here to read their summary, “MBS Annihilated after Fed confirms the Hype”. MBS is the open market bond that dictates conventional mortgage interest rates.
So what happened and why? Yesterday, Ben Bernanke rattled markets by shifting tone and hinting that the FED may soon start slowing or the official term “tapering” back their QE program, which is the purchase of Mortgage Back Securities and Treasury Bonds. The recent improvement in the economy, specifically in the jobs reports, could soon force the FED to slow down this artificial QE “juicing”. Bernanke’s comments gave credibility to the market rumors it will come sooner than anticipated, and that is the reason rates spiked yesterday.
Where to go from here? We know this much, if the economy, and especially the jobs market, keeps improving, the FED will soon slow down and stop their program (QE) and that means rates will continue to go up.
What to do? The silver lining here is the increased volatility will surely offer opportunities, where rates will temporarily drop before going back up. If you haven’t yet taken advantage of these rates, let’s talk, I can help you to time the pullbacks and get the best rate.
Please don’t hesitate to contact me if I can answer any questions or update you on what rates are doing.
This is an exact copy of the Email Newsletter bulletin sent to our Clients on May 23,2013