With the average interest rate for a 30-year fixed rate mortgage jumping to 6.74%, I asked Carl Heimlich with C&F Mortgage to pen a quick note on what is happening in the mortgage market. (although rates still are not that high historically) –
What’s going on?
The Producer Price Index (wikipedia), the government’s key measure of inflation at the wholesale level, was up 0.9 percent in May, compared to a 0.7 percent rise in April. Economists surveyed by Briefing.com have forecast a 0.6 percent increase.
Positive economic news or the scent of inflation can cause Bond prices and home loan rates to worsen.
So what happened last week?
There was a sell-off in Mortgage Bonds on the news of Central Bank rate hikes in other countries, as these hikes make other global investments more attractive than our US Bonds for those seeking higher yields. The reduced demand for Mortgage Bonds causes prices to fall and home loan rates to rise.
Should I buy?
Mortgage rates, of course, are only one third of the affordability equation that plays out in the housing market. There’s also home prices themselves and household incomes, both of which have been positive lately for buyers.
There are many good deals out there right now, I would recommend that you check with your Realtor and if you find the right deal, lock in your rate as soon as possible. (ed note: bolding mine)
Update: more than you ever wanted to know about interest rates at Econbrowser.
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