I’ve received 6 or more calls in the last week all asking the same question. “Are Denver mortgage rates going up? Should I buy/refinance right away?” First, the simple answer is no. At least don’t expect an increase anytime soon. Since the Federal Reserve Board increased short term government rates on Wednesday, mortgage rates have actually fallen slightly. Isn’t that strange?
It’s not strange when you look at all the other factors. The Fed only raised rates for short term government debt, it doesn’t directly effect mortgage interest rates for loan homes. Those are determined by the market for mortgage backed securities which are longer in duration and traded on the national market like stocks and bonds. Those rates actually went down since Wednesday.
But, more was going on. The stock market was hammered with the Dow Jones loosing over 600 points in just two days on Thursday and Friday. The folks who sold those stocks put some of that money into mortgage-backed securities. So, local lenders responded with slightly lower rates. In fact, I got this great memo from our favorite lender, Jimmy Kinley. He put it simply like this.
Memo From Jimmy Kinley
The FED raise short term interest rates today. This is something that the media has been running thru the mud for months. Why do I say that? Here are some things you may have heard that are totally inaccurate;
- You need to refinance or buy now because when the FED raises rates that means that your 30 year fixed mortgage will go up.
- The only reason rates are still low on for mortgages is because the FED is holding them low.
Truth About Mortgage Interest Rates
- The FED is no way controls a 30yr fixed mortgage rate. (or a 10, 15, or 20yr for that matter)
- The FED raised short term interest rates (Like Prime rate or Fed funds rate). This means that your rate on your credit card likely just went up. Maybe your Home Equity Line of Credit (HELOC) if it is attached to Prime Rate.
- Mortgage rates are control by indexes that go up and down just like any stock in the stock market. When the MBS (Mortgage Backed Securities) indexes go up, rates go down. When there is a sell off of MBS’s and those indexes drop sharply, rates go up sharply.
- The immediate reaction to the FED raising short term rates today was an improvement in the MBS markets that caused rates to get slightly better. “Yes, they got better. The guy on the radio is not telling you the truth.”
Outlook for Denver Rates
Who knows. Anyone that says they can predict is crazy. Rates have to go up at some point. My gut says that this year we will likely continue to see recovery in the US and most importantly in overseas markets. If Europe and China get it back on track we will see rates start to go back up. In the short term, I really don’t see anything dramatic happening.
Rates started this year within .08% of where they are today. That is as stable as I have seen rates in my 15 years. As always I truly appreciate you taking the time to read this and I hope it helps you wade thru the nonsense that the media will be telling you in the coming weeks. Have a fantastic Holiday Season!