Historically mortgage rates trend higher during warmer months. This is not only a market driven from Wall Street but also a real estate driven market event as well. We all know that the peak purchasing season is during the summer months. From the time school lets out until the time it starts up again, consumers looking to move or invest in a vacation home traditionally have done so during warm periods of the year. Mortgage rates tend to climb with the mercury. It’s been the case in each of the last 4 years. As spring months turn into summer, the average 30-year fixed mortgage rate rises. This year should be no different. In part because of both market influences.
The market is ripe for rates to increase albeit nominally. With mortgage rates artificially low and U.S. inflation in check, the current mortgage rates have been extremely consumer friendly. Very few market analysts had expected rates to be in the 5% range this far into our economic recovery. With the economy showing initial signs of recovery like retail sales improving, Job loss moving towards balance or even growth, home values beginning to stabilize and fuel costs rising are all signs of economic improvement. The means that rates are not far behind this curve. Yes rates will start to rise.
One impact to the bond market which effect mortgage rates is the Fed’s Buyback program ending at the end of March. This means that the market for buying mortgage securities on Wall Street will not have it largest buyer outside of China leaving the market open for other institutions to pick up the slack. Without the Fed’s involvement rates would have been at least 1% higher. Now that they are stepping out the normal market buyers will effect bond investments driving the value down (Yields increasing) thus increasing mortgage rates based on less initial demand and perceived market risk.
So what does this mean to the home buyer or home owner seeking to refinance? Do it now. Buy, refinance and lock your rate in March and April for the best rates of the year. If you are waiting until the summer to buy then do it in the summer of 2010 as rates will still be near historical lows and no ones crystal ball is clear enough to project similar rates in 2011. This is the perfect spring and summer storm, low home prices and rock bottom rates.
Get a lock on your rates before Labor Day and save.
For more information regarding home financing please contact Desmond Elder at Pacific Mortgage Consultants, Inc. by e-mail e-mail or phone 530-582-4238.
Leave a Reply