Chronological Explanation of What Drive’s Mortgage Rates
“Since 2009, consumers have been hearing; mortgage rates are at all-time lows, and that it’s prudent to assume rates will be going up soon. And yet, here we are ~7 years later, and mortgage rates continue to hover around all-time lows. So, what gives? Here’s a chronological explanation of the market mechanics that have kept mortgage rates lower, for longer, than anyone anticipated: First off, mortgage rates are based on mortgage bond prices (not the Fed); higher bond prices = lower mortgage rates, and vice versa. 2009 market meltdown and investment capital hemorrhages out of stocks to find safe parking in bonds, pushing bond prices up & rates drop to all-times lows. Then, as the stock market recovers it would make sense that rates tick higher, but instead the Fed announces is Quantitative Easing (QE) program which spends billions of dollars buying mortgage bonds in order to keep bond prices up, and rates down. The Fed’s QE program eventually ran out of money, it appears rates should move higher, but then oil prices unexpectedly plummet. Oil prices are the greatest driver of inflation, and so the deflating oil prices give bond prices a significant & unexpected boost, again keeping rates lower, longer than expected. Generally speaking, geopolitical uncertainty helps mortgage rates here in the US, as US bonds/treasuries are the world’s safe parking for money, and the latest unexpected event with exactly that impact was the Brexit. There is no crystal ball for how long until rates make a significant move higher, but for now, rates remain at historically low levels.” Ephraim Schwartz with Odette Mortgage Group
Carmen Carr your local real estate agent, reached out on-behalf of the current mortgage status. Above is Ephraim Schwartz’s with O’dette Mortgage Group’s thoughts on the current mortgage market. This still is a great time to buy, rates are still remaining at historical lows. If you have any questions, please contact Carmen Carr for information about purchasing a beautiful home in the Truckee- North Lake Tahoe area.