Carson Valley Mortgage Interest Insight Report for August 2013 – Courtesy of Patrick Winchell with Movement Mortgage
Today’s blog post was written by Patrick Winchell of Movement Mortgage, The Gordon Team’s preferred lender partner, to explain what is going on with interest rates an how they may affect buyers and the decision-making process.
The picture in this post shows where interest rates have been recently and their direct relationship with the US 10 Year Treasury. To tell you the truth, I watch the yield on the US 10 Year Treasury daily to predict where rates are going. Today, the yield on that bond is 2.815%. The higher that number gets, the higher rates get.
So, what is causing the 10 Year Note to increase, thus causing mortgage rates to increase? It all has to do with The Fed and their current bond buying program they have had in affect the last few years. To help the country out of the recession and ease the flow of money, The Fed has been spending over $80 billion per month to buy bonds and keep money cheap. Since the economy has been improving, The Fed has made remarks about pulling back on this bond buying frenzy. This has scared investors. In anticipation of The Fed not buying as many bonds, investors are selling their bonds and causing the yields to increase. Thus, mortgage rates follow suit.
So, where do rates go from here? It seems that investors are relying on the job market to determine the health of the economy. I predict that if we see strong job numbers in August (report comes out the first week of September), investors will use that as an indicator to sell their bonds, thus causing rates to increase.. Of course, there are other key indicators that come out daily that may cause some swings. But, I believe investors are going to look at the job numbers to predict how soon The Fed will be pulling back on bonds. I also believe that the job numbers may be skewed towards the positive since we will be coming into the retail build-up for the holiday season. Seems like retailers try to start Christmas in September to increase sales. Bottom line, if the job numbers that come out in September are strong, rates will increase more. It almost seems inevitable that rates will increase since The Fed will have to pull back at some point and let the actual market set the rates. You know, that thing we call free markets.
If you are considering getting pre-qualified for a home loan, act now before rates go up any further. Contact Patrick Winchell of Movement Mortgage at (775) 230-5023 or via email at email@example.com.