The Real Estate industry has been talking about a rate hike, or as I like to say, rate spike, for some time now. It is inevitable, it’s just a when, and not an if. For the readers who are not in the industry, I like to call it a rate ‘spike’ for a simple reason. The mortgage rates do not go from 4.5% to 5.5% in one or two days, and if they did, I would feel more comfortable calling it a rate ‘hike’. When primechanges dramatically, I refer to it as a hike, but not the residential mortgage interest rate market. It typically takes months for the interest rate on a FHA or Conventional mortgage to move a full 1%, and if you look at the movement in that time on a line graph, it makes a spike. That is why I like to call it a rate spike. Just me.
Hello, I'm Spike!!!
In November of 2008, the federal government started the purchasing of mortgage back securities, and in doing so, it has made the lending market less risky for the banks. CNN Money reported that Freddie Mac, one of the major governing bodies in home loans in America, said that we enjoyed .4% better rates because of the buying back program. Since recent months average were between 4.9% and 5.125%, that would mean it would be safe to say that without the governments help, rates would have been in the middle 5% range all 2009 rather than staying just under and just over 5%…speaking of the 30-yr fixed rate.
What can we expect for the next year or two, and maybe even three, as far as how interest rates in Real Estate go? It’s safe to assume, when all the economists, and financial gurus all agree that rates are going up, that rates will go up. Expect a rate spike, and we may started to spike already. The market has reported negatively on interest rates for over a week now, and the current average is at least .125%, if not .25% higher today than it was two weeks ago. The good thing is, the financial gurus and forecasting economists also believe that we will not see a huge swing in rates, rather low 6% area at worse.
Leave a Reply