Mortgage rates are still great, however the tide has turned over the past few weeks. In fact, if the mortgage rate market was a jogger we have seen the “jogger” trip, stumble and then finally fall down. No broken bones, just a knock down.
Non metaphorically speaking, Mortgage rates began ticking upward a few weeks ago. Then, mortgage rates encountered a few more significantly bad days where the “ticking” was material. Finally, last Friday the bond market fell nearly 80 basis points. As a result, mortgage rates jumped .25% to .375% higher from just 2 weeks ago. Amazingly, we are in an extremely low mortgage rate environment.
Despite last Friday, mortgage rates are still extremely low. Mortgage rates will continue to be volatile this year due to all that is happening in the US and global economy. The big benchmarks to monitor will continue to be:
New Job Creation
Timing of Fed Funds Rate Hike
The stronger #1 and #2, the sooner we will see #3. Some bets are on this June for the first hike. With regard to item #3 above, the Fed usually embarks on a repetitive rake hike mission. In other words, until a specific goal or metric is reached rates are hiked incrementally and repeatedly – not just once. One hike shouldn’t do much to mortgage rates however a cluster of systematic hikes could push mortgage rates up. The connective tissue here is that the Fed is basing future Fed Funds Rate hikes on employment. More than likely, rate hikes will come only on the heels of a strengthening economy. For example, more jobs, increasing wages and so on.
When more people have jobs, more people buy homes. More people buying homes means more people sell homes. As a result of more activity and people earning more money, a slight rate bump in the mortgage world is not a huge issue. It’s palatable and non-threatening.