Higher rates? OK, now what?

By now we all know rates are higher than they have been in quite some time.  Some lenders have rates for 30 year fixed mortgages above 5.5%.  Seems funny since rates were very recently hovering around 4.75%.  See yesterday’s post for information on “why” this happened.
 
Based on my post from Tuesday, here are some questions you might be thinking:
  • So are we on the verge of a full economic recovery? No, not on the verge. 
  • OK then, then a full recover must be just around the corner, right?  Maybe, but not necessarily.
  • So… what was the ‘good news’ that caused everyone to get trigger happy on selling bonds and pushing interest rates higher?  I’m glad you asked!
 
The ‘good news’ wasn’t really ‘good news’ but actually ‘not as bad as we thought news.’ The market reacted positively with the release of the Jobs Report Wednesday morning that showed initial jobless claims came in slightly under expectations — only 623,000 jobs were lost when the market expected the number to be around 636,000. 
 
It is ‘good news’ when the market beats expectation, but it seems everyone ignored the fact that over 600,000 people still lost their jobs last month!?!
 
It seems the total recovery may not be as close as some hoped last week, which actually bodes well for interest rates.  Moving forward, the environment is still favorable for low rates due to: 
  • The Feds and the Treasury’s continued motivation to keep rates low by purchasing Mortgage Backed Security Bonds.  The White House’s “Home Affordable” Program will be severely slowed down if mortgage rates remain above 5%.  To continue to assist the housing recovery, economic recovery, and keep all parties involved looking good in the eye of the public, expect the Feds and the Treasury to step up their efforts.
  • Rates for a 30 year fixed mortgage have consistently stayed in the 4.625% to 4.875% range.  Lenders have demonstrated a willingness to loan money at this rate, but not much lower than that level.  Meaning, there is a precedent for interest rates being that low and they could move back into that range.
Based on the fact that rates will probably recover some (if not all) of their losses over the next several weeks/months, my advice is simply “be ready.”
  • Now is the time to get prequalified and start looking for your new home.  Finding a home could take several weeks, and rates may have moved lower by that point.
  • If you are looking to refinance, get the process started and wait for a target rate… 4.625%, 4.75%, 4.875%, or 5.0% and be prepared to lock-in as soon as it is available.

Interest rates have take a dramatic turn north, but all is not lost.  Planning ahead and getting the ball rolling on a purchase/refi will put you in a great position to take advantage of improving interest rates. 

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.
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