Mortgage rates have risen over the past month in one of the ugliest rate spikes I’ve seen in the nearly 7 years I’ve been in the mortgage industry. Historically speaking, rates are still fantastic, but they’ve increased a lot in a very short period of time, underscoring how the market can very quickly take away any gift it has given.
Check out the graphs below, which are from Bankrate.com:
As I’ve said numerous times, rates have a lot more reason to go up than down – and the graphs above bear this out. Rates tend to spike a lot faster than they go down.
The recent spike started with the relatively positive unemployment report in May and has pretty much continued ever since as the 10-year bond yield has continued to rise (if you’re interested in finding out more about how mortgage rates are determined, check out my article here).
Might we see rates drop again? It’s possible, but it’s going to take some bad economic news to make it happen. Good economic news tends to be mortgage rate negative because the financial markets believe the Fed will ease up on interventions that have pushed mortgage rates down. If the Federal Reserve sees the economy strengthening, it will likely pull back from it’s bond purchases, which reduces demand for bonds, and results in rates increasing.
If the economy takes a turn for the worse, we could see rates dip again, causing the Fed to continue its bond purchases and keep a lid on rates.
What will rates do in the coming months? Who knows! We live in such a crazy economy today and all we can do is hang on for the ride. But if you get a good mortgage offer, do not delay in pulling the trigger. What the market giveth, it can also taketh away – and fast.