Trends in Mortgage Rates
Trends come and trends go. But, what do mortgage shoppers need to know about rates as they look into the future? It’s impossible to pinpoint a single factor that causes mortgage rates to move up or down. Still, mortgage experts often have observed that fixed-rate mortgage rates typically follow the direction of long-term Treasury rates.
In 2009, mortgage rates continued to decline for most of the year, widening the gap between sinking mortgage rates and climbing Treasury rates. The Fed then pressured mortgage rates further by announcing plans to buy up an additional $750 billion in mortgage-backed securities and up to $300 billion in Treasury securities. Mortgage rates slid again, with the 30-year, fixed-rate mortgage hitting a low of 5.13 percent.
People sometimes miss that the mortgage market is an $11 trillion market. The mortgage market is a monster, and there are many participants in that arena. So, as powerful as the U.S. government is, it’s not as though they set those interest rates in stone.
While it’s impossible to predict the direction of mortgage rates, smart consumers can take advantage of trends and opportunities in today’s market. Mortgage rates are locked into a trend of “plunge” and “surge.” The key is for consumers to be ready for the “plunge” part so they can lock their rate before the “surge” starts.
First-time home buyers are particularly blessed right now. A buyer’s market and government incentives have combined to create a once-in-a-generation climate for entry-level buyers. Take advantage of the $8,000 tax credit, take advantage of 5.5 percent interest rates, take advantage of home prices down 50 percent in many markets. It just doesn’t get any better than that!
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