Friday, February 2, 2018

Stop What You're Doing. Watch the Mortgage Interest Rates.

People ask me all the time where mortgage interest rates are and where they'll be next month. 

I always tell them the honest truth, that interest rates will do one of three things:  go up, go down, or stay where they are. 

Interest rates have stayed where they were a couple of weeks ago for years.  Never breaking lower than 3.5% and bumping barely above the 4.0% mark for 30-year loans has been a constant for years now.  Tough recessions will do that.  The Fed has stayed relatively constant most of that time.

But look again.  Interest rates are up, and going higher.  Suddenly.  Significantly.

Freddie Mac (quasi-governmental secondary market buyer of mortgages since it was created in 1971) has been reporting on mortgage activity weekly for decades.  It surveys mortgages from across the country for the prior week, compiles the data and reports publicly on Thursday mornings.  Yesterday was Thursday, but not the vanilla ice cream kind of Thursday to which we've become accustomed.  30-year rates went to 4.22% for the common cost of 1/2 point. 

If you watch the economy, that should shake your foundation.  But there's more.  Reviewing the data right now today, it didn't stop at 4.22%.  Right now, you'll commonly see 4.50% for the same cost.

That means that mortgage interest rates increased over the past week or ten days 1/2 percentage point.  Compared to then, for every $100,000 you borrow at the end of this week, you'll pay $30 more in your monthly payment.  If you borrow $500,000, that's $150 more.  Every month for as long as you owe the money.  It adds up.  That's not whoop-out money. 

What caused it?  Many things, but note the jobs report this week.  200,000 new jobs.  Nice.  But the big news was that average wages increased significantly.  That's what the Fed has been watching for months. 

Watch the Fed.  Watch the jobs reports.  Watch the interest rates.  Call me if you want to buy a home this year.  Looks like this month might be a whole lot better than three or four months from now.

I'm always here for you.

Enjoy the day,
Mike Moger
WK Real Estate
303.541.1920 office
303.859.4467 mobile