This week, mortgage interest rates hit their highest level in past year and it has a lot of buyers out there pretty concerned. With an average around 4%, the rates are still near all time historical lows but when compared to the mid to low 3's we saw in September, it is a pretty significant jump. To find out why the rates are higher now and the long term forecast for rates, I turned to the expert, Tracey McVicker with SWBC Mortgage.
According to Tracey, œinterest rates have increased dramatically over the past 30 days or so. Most of this is because the stock market has been performing so well, which is usually to the detriment of the bond market, and thus rates. We looked to be having a bit of a rebound until on Wednesday May 22, after Fed Chairman Bernanke's confusing comments, the bond market had its worst day in recent memory and unfortunately the selloff has continued for the last 7-10 days. As of right now, mortgage rates are the highest we have seen in the past 12 months which begs the age old question œwhat will happen next?
As with all markets, everyone guesses but nobody really knows. Today may be the lowest rates we ever see again or this could be just a short-lived market correction. What really happens will probably be somewhere in the middle though, with rates staying just above or below 4%.
Because of this, I almost always recommend that buyers lock their interest rates at the earliest opportunity which is usually once they are under contract. Why?
1. Interest rates are still fantastic even though maybe not as great as they were just a few days or weeks ago. Current rates are 3.875 - 4.25% depending on the day.
2. The current market trend is negative and we don't know when that will change.
3. Most importantly, interest rates nearly always go up faster than they improve. Therefore, the risk of not locking is far greater than the potentially small reward of waiting, maybe getting lucky and saving $20-$40 per month for most buyers.
To learn more about how rates are determined, click here to see a short video that Tracey put together for me. Tomorrow I will be talking more about how rates should impact the Denver market moving forward. In the meantime, if you have any questions about rates and these higher rates mean to you, feel free to contact myself or Tracey anytime, Tracey's info is below.
Tracey McVicker
Senior Mortgage Consultant
SWBC Mortgage Company
400 Inverness Parkway, #160
Englewood, CO 80112
303-405-6400, Office
720-480-3737, Mobile
877-789-4499, Efax
LMB # 100023964 / NMLS # 257339
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