Say Good-Bye To Histroical Low Mortgage Rates

Mortgage rates tend to climb with the mercury. It's been the case in each of the last 4 years. As spring months turn into summer, the average 30-year fixed mortgage rate rises.

This year should be no different.

The Environment Is Ripe For Rates To Rise

With mortgage rates artificially suppressed and U.S. inflation expectations at a minimum, the current mortgage rate environment is extremely consumer-friendly. Few people expected 5.000 percent rates to be available this late into a recovery.

But with the economy showing signs that recovery is sustainable, pressure is on for rates to rise.

•Retail Sales data shows consumers are out spending again
•Job growth gets closer to net positive, month-by-month
•Home values have stopped falling, and, in some markets, are rebounding

Each of these factors draws money out of the relative safety of the bond market and into the riskier world of stocks.

Furthermore, the price of gas is rising. It's up 20 cents per gallon in the last 30 days. No doubt you've noticed. Rising gas prices are inflationary and when gas prices rise, we find that mortgage rates are usually right behind.

The Fed's Buyback Program Ends 7 Days From Now

There's another reason for rates to rise this season, too. It's the Federal Reserve's mortgage buyback program.

More specifically, its pending ending.

The Fed's buyback program was, by most accounts, a success. Rates are an estimated one percent lower than they would have been without the Fed's intervention, and the rate drop happened without much disruption in day-to-day mortgage market trading.

However, the Fed's program ends next week. March 31, to be exact. And when the Fed leaves the market, there's going to have to be someone to pick up the slack demand or else mortgage rates will have nowhere to go but up. This is because mortgage rates move opposite of mortgage bond prices.

Yields rise as a result.

Beware Of Inflation

Inflation expectations are low for now, but that can change quickly. It only takes a series of strong economic data to make Wall Street question what's really ahead for the U.S. consumer. Inflation is the enemy of mortgage rates and its presence makes rates rise.

Therefore, use the mortgage rate chart to your advantage. You can see what's happened to mortgage rates in each of the last 4 summers -- 2010 should follow suit. And when the mortgage market turns for the worse, it's going to turn quick. Be ready for it.

Get Locked In March Or April

Email me anytime and we can talk about your mortgage situation -- purchase or refinance. You don't need to lock a rate today -- you just need to be ready to get it done because when it's time, it's time. As soon as you notice rates are higher, it'll probably be too late to do anything about it.


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John Payne is an active Mortgage Planner. Email John@JohnPayneLending.com or call 510-799-1400 or 800-259-3424.