The million dollar question - maybe it's the billion dollar question - a million just doesn't mean as much any more. The truth, as it always has been, is that we don't know where rates are going. However, what we do know is that when inflation goes up, so do long term interest rates, which includes mortgage rates. We also know that the Federal Reserve Board (with the infamous Mr. Bernanke at the helm), has recently begun a new round of bond buying (known as QE2), and that the intention here (at least in part) is to spur inflation. Based on what we're reading, it sure doesn't seem anything needs to be done to "spur" inflation.
Much of the recent financial news is beginning to report various inflationary concerns; not the least of which is in relation to commodities, which results in higher prices to consumers on food and other every day types of items. We've read that turkeys will cost 30% more this year; and that cotton futures are up 90% this year. Looks like jeans and t-shirts will be going up soon.
What does all this mean? There is real inflation here, and the bond markets (including mortgage backed securities) reacted with a huge sell off last week. This sell off means mortgage rates increased by about .25% last week, and this week is off to a similar start. One expert we read said, "Unless there is a huge negative economic decline, the end has come for low rates". Of course, while the indicators are pointing a certain direction, even the experts can be wrong - and in fact they are wrong often.
The good news: mortgage rates are still at ridiculously low levels. Yes, they did get down to the 4.25% range, and if you were able to take advantage of those rates, fantastic. But even with the recent uptick, they are still in the 4.5% range. These rates are still fantastic, so if you've been considering exploring your options for purchasing or refinancing, it appears now may be the time.
As always, we welcome your thoughts and questions.
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