Mortgage Rates Pop 25 Basis Points Monday
“Economists have predicted nine out of the last five recessions.”
–Paul Samuelson
Just because economists have been predicting, wrongly, for years now that interest rates are about to rise doesn’t mean that it won’t happen.
Someday.
In the meantime, there are periodic tremblors, suggesting that rates won’t stay quiescent forever.
Monday Financial Tremblor
The biggest interest rate jolt in over 18 months hit just this Monday, when 30-year mortgages jumped 25 basis points, from 3.75% to 4%.
That may seem like a measly .25%, but — in a multi-trillion dollar market where moves are measured in one-hundredths, called “basis points” — such a move is like a 5.0 tremblor on the financial Richter scale.
In other words: attention-getting if not necessarily damage-causing . . . and perhaps portending worse.
Seasonal Peak
As in past years, long-term interest rates naturally tend to rise in the second quarter, when mortgage demand is highest.
As the housing market seasonally decelerates, lenders have to become more competitive and interest rates drop.
Against that backdrop, though, is the growing chorus of economists anticipating the end of super-low rates, courtesy of the central banks (none more important than The Federal Reserve).
Weighing Risks
With such conflicting signals, how should prospective Buyers (and mortgage borrowers) position themselves?
I’d lock in a good rate now.
If rates go higher — and eventually, they will — Buyers will be safe.
If rates surprise everyone and drop significantly from today’s historically low levels, financially conservative Buyers will be able to refinance (less conservative ones — or people with impaired credit, no equity, etc. — may not qualify).
P.S.: if it’s available for a reasonable fee, a re-lock option is a good way for borrowers to play interest rate volatility.
