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What to Do When Home Loan Rates Start Rising

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Needless to say my phone has been ringing off the hook from friends and past clients wondering what to do as home mortgage rates begin to climb. Over the last few years, American consumers have grown accustomed to interest rates breaking records with the lowest interest of a generation. Unfortunately, the reality is the at some point mortgage rates won’t recover and the trend of rising rates will be set in motion, if it hasn’t already.

What Causes Mortgage Rates to Fall?

Bond Market: When the bond market gets battered in most cases home loan rates will rise. Specifically, when the 10-year bond worsens usually the pricing on the 30-year mortgage rates worsens as well. Home loan refinancing becomes more active when the bond market improves.

Economy: Typically bad news in the U.S economy is good news for the mortgage market. When the unemployment ticks up, rates often tick down. When the GDP comes in lower than expected, rates on home loans may decline as well.

Federal Reserve: When the Fed commits to increasing the purchasing of mortgage bonds then rates tend to improve. When the Federal Reserve instructs Congress to bail out Fannie Mae and Freddie Mac then the mortgage market rallies favorably. When the U.S government pushes quantitative easing, ie. QE3, the bond market reacts and home loan rates drop to the benefits of consumers.

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