Rates May Increase – Will They Come Back Down?

Filed under: Market Comentary

It’s been a tough few weeks with interest rates running in the wrong direction. I’ve been looking to various resources to make sense of what is happening right now. Barry Habib offered great insight, particularly for those of you in the real estate industry.

Fear of Inflation Affecting Interest Rates

One of the things affecting interest rates right now is the fear of inflation. Interest rates are backed by bonds. When people are hungry and want to buy bonds, it’s good for interest rates. It drives the yield down, and yield = rate.

Who wants a fixed bond for 30 years if inflation is going up? It actually deteriorates the investment if prices are going up.

2020 vs. 2021: How the Numbers are Stacking Up

All of our year-over-year figures are starting to line up with the initial shutdowns when we had some low numbers from March thru May 2020. They do a rolling average to calculate the annual figures, with other calculations.

If you look at the bigger picture, our current inflation is still within what the Feds want to see. But it looks different because of the unusual numbers we had last year.

Anticipated Trends through 2021

We’re going to see a few months, probably starting in May, where the comps will look bad. It could be rough on interest rates. For buyers, the best move is to lock the rate right away. Don’t wait around because the prediction is that we will see an uptick in interest rates.

When we start getting back into modest, positive numbers later this year (Q3 and Q4), then it’s likely that interest rates will start coming back down again.

We’ll see what happens! It will be interesting to check this in 3 – 6 months to see how accurate the information is. I think it’s worth mentioning right now. Of course, it’s best to talk to your loan officer to find the right strategy for your unique situation. But in my opinion, lock in your interest rate to ride out the potential ups and downs we are going to see. Reach out to me if you’d like to evaluate your current mortgage and other options.

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