Mortage Interest Rates Rise

Are Denver mortgage rates going to go back down? Or, are they going to continue to rise?

Jimmy Kinley believes mortgage interest rates are likely to rise slowly.

Bonds and Denver mortgage interest rates took a hit again last week and that pattern has continued this week.   That means many potential Buyers may be left asking: Will home loan rates go back down? My favorite mortgage lender has given me and other Denver Realtors at Coldwell Banker some “talking points” to communicate this complex mortgage market to our clients. Here are Jimmy Kinley’s insights:

1. First and foremost, home loan rates are still near historic lows for now.
2. That said, rates have been headed up fast in recent weeks…and indications are that those unbelievably low home loan rates may be behind us. (Rates have increased from an average of almost 4% on November 4^th Then, The Fed announced their Mortgage backed Securities purchase program on Nov 3^rd . Now rates  average of 4.84% this week.
3. Looking at the big picture, there are only a few things that could bring back the lows that we saw in early November;

• If the Fed’s recent round of purchasing MBS (Mortgage Backed Securities) is strong enough to offset the inflation fears and all the surprisingly positive economic news we could see a decline in rates.  We know the program probably will not get bigger as it is a balancing act between increasing the national debt (spending money to buy MBS) and trying to push up indexes on MBS (By purchasing MBS, raising the MBS indexes, and therefore lowering rates)
• If the economic news turns really sour early in the year we could see investors get back into purchasing Mortgage Backed Securities and that could drive rates down.
• If the financial problems in Europe worsen significantly. This would drive investors into the safe haven of the US Bond market – and, therefore, it could help Bond prices, but probably only modestly.  This could drive rates back down.

1. Realistically, the chances of these events happening are unlikely.  In the end, rates may see some fleeting improvements, but will likely continue to creep up over time.
2. End by reiterating to your clients that home loan rates are still near historic lows FOR NOW. That means, now is the time to act.

The average for a 30yr mortgage since being recorded is still in the high 8% range.  The best we have ever seen was a little over a month ago.  I once heard Chris Mygatt say “Rock bottom is always in your rear view mirror” and that is so true.

I have in the past stated that rates should stay the same or possibly go down in the coming months due to the FED’s MBS program being rolled out.  I will be the first to admit that I was wrong and I could never have predicted the chain of events that has led us to this moment.  With that being said, I am truly sorry if I steered anyone in the wrong direction. I constantly read and try to understand any economic news that effects mortgages and every “expert” opinion and forecast that I read all agreed that this would be the case.

Here is a high level of what has happened.  The combination of the FED announcing the program to purchase MBS and not immediately implementing it caused investors not to get involved in purchasing MBS which caused those indexes to fall therefore pushing rates up.  When those indexes decreased it actually caused a bit of a sell-off of MBS.  That caused a big dip in MBS and a big jump in rates.  Since then, the positive economic news and the threat of dramatically increasing our national debt therefore creating inflation fears has kept this run of MBS indexes dropping and rates going up moving swiftly.  I just wanted to take a brief moment to explain what was going on as your clients will be looking to you for some knowledge if there are not already taking to me.

Contact ForJimmy Kinley, Senior Mortgage Advisor

License# MB100020560

Direct/Cell: (720)261-1410