How Would I Know If Interest Rates Are Expected to Go Up or Down?

Wondering what to make of “historically low” interest rates? Here’s some helpful information and advise from Academy Mortgage

Everyone these days keeps talking about how now is the right time to buy because housing prices and interest rates are low. But, maybe you’re not ready quite yet to buy a new home, and you want to know how long you can wait before interest rates will rise again. Here are a few quick indicators that will let you know how interest rates may change:

 

Interest rates go UP:

When the economy is growing or is expected to grow, stocks will likely become the more favored investment.

When investors buy more stocks, they purchase fewer Mortgage-backed securities (MBS), which drives the price down.

When the price of the MBS is lower, the yield increases.

Since mortgage rates are based on the yield of the 30 Year MBS, you would expect rates to increase in this environment.

 

Interest rates go DOWN:

When the economy appears to be slowing or is doing poorly, investors typically move their money out of the stock market and into the safety of the MBS.

This drives the price of these investments higher, which results in a lower yield.

Since mortgage rates are based on the yield of the 30 Year MBS, you would expect rates to decrease in this environment.

Since these market variables and expectations change multiple times as economic reports are released throughout the course of a week, it is not uncommon to see mortgage rates change several times a day.

Understanding how rates move is not necessarily as important as having a loan officer that is equipped with the technology and professional services to track and stay alerted at the precise moment rates make a move for the better or worse.

Posted in Home Ownership.

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