Rates were off to a stable start in 2014. Impressive considering the Fed had officially begun the tapering process. This refers to the unwinding of the interest rate supporting program that started in Dec of 2009. This program is what pushed interest rates down to historical lows. Mortgage interest rates are still near historical lows more than 3 years later.
Home Loan Rates – A Picture is Worth 1,000 Words
To give some perspective in regard to interest rates I have shared a revealing visual with you. The graph/image above shows bond yields over the past 30 years. Mortgage rates follow the same pattern as bond yields. As bond yields (not bond prices) rise, interest rates rise and vice versa. As you can see, bond yields have varied within a very constrained channel for 30 years (yes YEARS). Over the past 3 decades, The chart shows yields trend up to the ceiling (while mortgage rates also rose). They then trend back to the floor (as mortgage rates also fell). This chart also shows that from a historical and technical perspective that there is little chance rates will “sky rocket” out of control.
How Rates can be Affected
It is always important to keep our eyes focused on the job market and unemployment rates as they directly impact interest rates as well. Overly and surprisingly positive data (lots of new jobs/lower than expected unemployment rate) will send rates upward. Overly and surprisingly disappointing data (lower than expected new jobs/higher than expected unemployment rate) will cause mortgage rates to drop. New jobs of 250k + and/or unemployment of 6.9% or lower could spark a rise in rates.
My Advice to Protect Your Mortgage Rate
I cannot emphasize enough the importance of working with a knowledgeable mortgage lending team. The House Team closely follows the bond market and we also know how to read and predict interest rate trends. We also have the ability to use our float down program to lower a client’s interest rate! This allows any client to lower their rate if the market improves after they have locked in while protecting them if rates tick up tomorrow.
By Jeremy House