As a consumer, making a mortgage related decision is one of the biggest financial decisions you will make of your life. We have learned in the last decade, that making these type of decisions without much direction or knowledge can be devastating to yourself and the US economy at a larger scale. It is important to work with a trusted professional and also do your homework! That is what this blog is all about! Keep reading to stay informed to what is impacting the housing market and hear it from a professional first.
In recent news, The Fed meeting last week gave renewed hope to consumers looking to purchase and rate shoppers a second chance to move from off the fence on making a finance decision. The combination of economic data showing less than stellar job growth and FOMC announcement has offered relief and a turning point for interest rates.
If you are thinking of buying a house or refinancing your mortgage, you need to consider making a decision with slightly stronger sense of urgency. Now that the Fed has eased off the gas pedal that was leading to higher interest rates, economic data will carry even greater significant weight as to when the reduced bonds purchases will begin. This is considered "Tapering" and one of the most used buzz words that would come across TV screens or newspapers. It is important to familiarize with "Tapering" and how it impacts interest rates. A program known as "Quantitative Easing" (this is the 3rd round) allows for the Fed to purchase US Treasuries (specifically 10 year) and MBS (Mortgage Backed Securities) and these bond purchases directly impact how interest rates are offered. When "Tapering" will occur the $85 Billion that is currently spent monthly will be reduced and rates will go up. The question is when, and by how much?
if you want to get an idea of the direction rates are headed, keep a close eye on the US 10 year Treasury. Currently the 10 year is trading at 2.65%; and when interest rates hit all-time lows in December 2012 and briefly in May 2013, the 10 yr. T-Bill traded as low as .69%. Interest rates dipped to all time lows on a 30 year mortgage that hovered around 3.25% at that time. So when a consumer wants to "hold out to see if rates go low again" it is usually based on little knowledge of what impacts rates, and leads to a misguided decision.
The 10 year reached a 2 year high around 2.97% on September 5th, before a Jobs Report was a disappointment. That particular report had a huge impact before the Fed's decision to back off on "Tapering." This was a sigh of relief in the bond market, and cooled off the 10 year to the 2.61% to 2.69% range has decreased the rate volatility that we have seen over the entire summer.
What does all this mean? Take a look at your financial goals. Make a list of Housing goals as well. Are you thinking about purchasing? Find out what you can get pre-qualified first. If you are looking to refinance, what are your short/long term housing goals? Contacting a trusted Mortgage Professional is the first step in the right direction to making this decision.
