Interest Rates Soar Over The Past Two Weeks
Wow did anyone see what happened in the last two weeks. As of today, FHA interest rates on a 30 year mortgage are now at 4.75. Interest rates on a conventional loan are sitting at 4.5% today. Compared to about two weeks ago, FHA interest rate on a 30 year mortgage was 3.75%. Conventional interest rates on a 30 year mortgage was 3.5%. This is a huge increase in rates in a relatively short period of time. This means your house payment will be approximately $135 higher today than they would have been 30 days ago on a $200,000 mortgage. This is a large increase and some borrowers can no longer qualify for a $200,000 mortgage. Some home buyers will no longer be qualified to purchase a home. Don’t get me wrong, 4.75% interest rate is still very low compared to historical rates. Mortgage rates were 18% back in 1984 when I purchase my first home. So why did this happen? The Federal Government announced last week that they may be slowing down on the program to purchase bonds. The Federal Government has been purchasing $85 Billion in bonds every month. This is a huge bond purchase each month and if the Federal Government reduces their purchases, interest rates will rise. The Federal Government said the economy is improving and they may not need to purchase as many bonds to stimulate the economy. It seems pretty clear that interest rate are going to increase in the future. How much they increase ins anyone’s guess. So what does this mean to most people? It means the cost to purchase anything will increase. Everything we purchase is tied to interest rates somehow. Even if you pay cash, the cost of most goods and services will increase. All businesses borrow money to run their businesses and they will pass on the price increase to consumers.
Have you been thinking of buying a new home? If the answer is yes you may wonder what you should do. I think you should make the decision to buy and purchase a new home before interest rates increase higher. It is my opinion that the trend for interest rates have changed. The trend for the past few years has been for rates to decline. Nothing lasts forever and everything goes through cycles. Nothing goes down forever and nothing goes up forever. My opinion is we should all expect to see rates increase over time.