Tuesday, November 1, 2016

What is Happening to Mortgage Rates?

Mortgage Rates continued their move higher, as financial markets adjust to the price of the “new perceived” realities of the presidential election. The average 30yr fixed rate has surged .5% higher.  The last time rates moved in this manner was in mid-2013.

What is the concern about the new perceived realities? Markets are repricing based on a Trump presidency and GOP-controlled congress. The problem is that markets have to “guess” as to the future outcome of the policies that Trump might enact as well, as the extent to which the legislative and executive branches will work collaboratively with his policies. Unfortunately, most of the best guesses are not good for US bonds. Higher spending, lower taxes, protectionist trade policies, and deregulation policies all add up to inflation. Inflation is the enemy of low interest rates.

Fortunately, this repricing of rates is likely to be short-lived. Unfortunately, that doesn't mean rates will simply come surging back to previous levels although we have clearly seen this happen in the past. We are looking at an actual feeling of increased risk (as opposed to just a reaction to the election). It would take a new motivation for the repricing to occur in a more positive direction. Until then, a lowering in rates isn't out of the question. Indeed, that can happen as a corrective move but there's no guarantee of its size or that rates may continue to move higher before it happens.

Working with a mortgage professional that offers many options will help you to acquire the best rate for your needs. Keep in mind that the rates today are still great. Do not let this increase stop you from the purchase of a home.

About the Author..

Toni F. Ryan | NMLS#230507

Senior Loan Officer | Synergy One Lending
Toni F. Ryan has over 20 years experience in mortgage lending - both on the wholesale and retail levels. She believes that education is key to making the best decision for YOU! She shares her insight into the lending world here and encourages your feedback. Don't forget to connect on Facebook!