Why are Interest Rates Going Up?

Mortgage interest rates have been trending upward all year. So, what’s ahead, and why?

The Federal Reserve Board will be meeting at the end of next month, and right now, the markets are banking on another .25% increase, according to Origination Pro, a publication for mortgage loan officers.

“Again?” Yes, as I type this, I have received an alert that rates are going up midday and to lock now if you’re floating your rate.

“Why?” Because good economic news leads to higher rates.

  • The number of new jobs for August was higher than expected.
  • More individuals are re-entering the workforce.
  • Wages have increased, on average.
  • Consumers are spending more money, putting cash into the marketplace.
  • Consumer confidence is soaring.

Chairman Jerome H. Powell said in his speech on changing markets and monetary policy:

“Over the course of a long recovery, the U.S. economy has strengthened substantially. The unemployment rate has declined steadily for almost nine years, and at 3.9 percent, is now near a 20-year low… With solid household and business confidence, healthy levels of job creation, rising incomes, and fiscal stimulus arriving, there is good reason to expect that this strong performance will continue.”

Read the full speech here.

Time for Action!

If you have an Adjustable Rate Mortgage (ARM), consider refinancing into a fixed rate, if you plan to keep the house for a substantial amount of time.

If you want to shorten your mortgage term to 20 years or 15 years, do so now before rates go higher.

If you want to buy a home and stop paying rent, don’t procrastinate. Get pre-approved for financing and contact a local real estate agent.

If you are working on your credit, ask your loan officer if you can qualify for an FHA loan now while your credit is improving.

As always, thank you for reading and recommending my books and services.

 

Rates Rising! Don’t Procrastinate to Buy a Home or Repair Your Credit

Today, Janet Yellen, Chair of the Board of Governors of the Federal yellenReserve System, signaled that an interest rate increase in March is likely. The Feds expect the economy to continue to improve; and accordingly, for interest rates to continue upward on a gradual incline.

30-year fixed rates:

Last summer – 3.75%
Now –  4.375% to 4.5%.
How long will it take to get to 5%?

I think that is the appropriate question: how long until rates are at 5%?
Not “if” but “when”?

If you have been procrastinating in buying a home, waiting for flowers or sunshine, that is a mistake. Not only will rates be higher, but sellers price their homes higher when their yards are gorgeous. Statistically, bidding wars are at their fiercest in March when both sellers and buyers come out of hibernation. Be smart and beat the rush if you can.

Have you been procrastinating with getting your credit repaired? Maybe you don’t have the money to hire a professional service. STOP procrastinating and get busy now. All the instructions are available for you in my newly released expanded edition of Repair Your Credit Like the Pros.

Does credit repair work? Yes, it does!

TJ wrote me to say, “I read your book…I increased my score by 70 points!”

The time is now to reach your dream of home ownership. The chart on the left is from a professional service (EZ Credit). The book on the right teaches you how to do it yourself to get the same results.

Credit repair works.

Credit repair works.

 

Mortgage Interest Rates Rising Rapidly

I want to make everyone aware that mortgage interest rates have been and are continuing tointerest-rates rise rapidly. The rate you were quoted last week no longer applies. In fact, the rate you were quoted yesterday no longer applies. Your interest rate is not secure until it is locked.

To lock your rate, ask your loan officer to do so. For a matter this important, make the phone call. Do not rely on an email which can be overlooked or missed.

A rate lock is tied to a specific property address, loan amount, and other terms. There is a “Lock and Shop” program where you can lock in your rate before you have an address; however, that is riskier to the lender, so the interest rate is higher, which pretty much defeats the goal in most cases.

If you want a lower monthly mortgage payment, I strongly suggest you resist the temptation to wait until after the New Year to find a house. Get with your Realtor now and make an offer. Then the minute you have a mutually signed Purchase Agreement, send a copy to your loan officer so that you can lock in your interest rate.

If you know someone who is thinking of buying a home in the near future, please pass on this vital information, because procrastination will result in a higher payment.

Thank you for reading my blog posts and for helping pass on intelligence through social media.

 

Last Call for 2016 Interest Rates

You know those New Year predictions experts make? Finally, after three years, it’s happening.interest-rate

January 2014, financial experts and mortgage professionals said interest rates would rise by the end of the year. They remained fairly flat.

January 2015, same thing with rates remaining fairly flat.

January 2016, same thing and rates remained fairly flat until this month. At the beginning of November, interest rates started climbing, and they haven’t stopped. Day by day, we see small increases that add up over a week’s time.

One financial predictor has forecast 30-year fixed rates at 4.5% by the end of December.

The Federal Reserve Board has said they will likely raise rates in December. And remember, the market is anticipatory. So if higher rates are coming, lenders react now by raising rates so they aren’t caught short-handed.

If you have been thinking about refinancing — possibly into a shorter term or getting cash out — do not delay another day. Get your application in and get your interest rate locked.

If you want to be a home owner but are waiting until after the holidays, that’s a bad idea. You find less competition among home buyers and better rates now than in January. Get your home now, lock in your rate now, and set the closing for after the holidays. You can wait to move, but you can’t wait to get your financing in place if you want the best deal and lowest monthly payment.

If you are in California or Washington, I am happy to help you as I am licensed in those two states. If you live elsewhere, I suggest that you contact a full-service mortgage lender. Forget the Big Banks who have a terrible reputation on so many levels. A full-service mortgage lender has both their own money to lend and can shop wholesale lenders as needed.

My next post will be questions to ask your loan officer. I wanted to get this warning out about interest rates as soon as possible. No more procrastinating! Consider this is your last call before rates go even higher. Feel free to pass this on via social media.

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Where are Interest Rates Headed Now?

We saw a month’s worth of financial volatility in one night on Election Telling the futureDay. Now that the election is done and Donald Trump is President-elect, what is ahead for mortgage interest rates?

Since I don’t have a crystal ball to tell the future, let’s look at the principles and then see if we can come up with a conclusion.

Factors and Principles that Determine Interest Rates

  1. The election result was a surprise to investors. Investors don’t like surprises. This caused a rapid selling of bonds, which pushed interests higher by .125 percent overnight.
  2. Any rapid change in rates settles back down along with investors’ nerves. Remember what happened with Brexit?
  3. Uncertainty brings higher rates.
  4. Good economic news brings higher rates.
  5. Interest rates were trending upward anyway, irregardless of, and before, the election. Last year at this time, 30-year fixed rates were averaging 3.5%. Now they are closer to 4%.
  6. Sometimes the market just goes with the momentum — for awhile.
  7. Other factors, larger on the global economic stage, influence interest rates more than the U.S. election. Specifically, the European Central Bank Announcement coming next month (and the anticipation of it) is having a greater impact on interest rates than President-elect Donald Trump.
  8. The President does not set interest rates. The global economic condition sets interest rates.
  9. The market is anticipatory. Investors try to guess what will happen tomorrow and then react accordingly today.

Back to our headline question: Where are interest rates headed? I’m sorry I can’t tell you exactly what will happen, but your crystal ball is as good as mine. If you are nervous about rates going up, lock in your rate and be secure.

Thank you for stopping by my blog. Feel free to subscribe and to pass this info on via social media.

If I can help you with a  refinance or home loan, I am licensed in California and Washington, NMLS 1294134. Send me at email telling me what you need.

 

Where Are Mortgage Interest Rates Headed?

rate cutInterest rates are down today! In the past two months, we’ve seen rates go from 4.75% down to 4.375%. Some aggressive lenders might even offer 4.25% to their best borrowers with high scores and large down payments today. So what’s going on?

Why did economists predict higher rates for 2014 when we’ve seen this drop in January? Does this mean they were all wrong and that rates are headed down again?  There are good answers to those questions.

First, mortgage interest rates do not go up in a straight line. On a graph, rising rates will look like an upward zigzag. Right now, we have a dip. This does not mean rates won’t turn around and go up again. That could happen very fast on Friday, which I’ll explain in just a moment.

Second, there are many factors that go into interest rates. This recent rate drop is largely due to December’s weaker than expected jobs report that came out in January. Investors try to anticipate what will happen, so if the unemployment report ends up being worse than expected — even if it is improved over the previous month — then that is bad economic news and rates drop.

Will Mortgage Interest Rates Go Up or Down From Here?

Friday, February 7, the January Jobs Report will be released. The results will be influential in which direction rates go. On the days between now and Friday, investors will be speculating, so we could see some volatility in rates. If the report shows a stronger hiring economy than expected, rates will go up — and that could happen very quickly. On the other hand, if the report shows a weaker hiring economy than expected, rates will go down. No one can say with absolute certainty what will happen.

My philosophy on rate locking is this: Lock the dips and be happy. If you see a rate you like, lock it and be happy. Even if rates go lower after, you still got a rate you liked, so remain happy. Once you lock in, stop watching rates. Why drive yourself crazy? But until you lock, watch rates and keep in touch with your loan officer on a daily basis.

A Few Rules About Rate Locks

Once your interest rate is locked in, you don’t have to worry if rates go higher. You are locked. A rate lock is a commitment from an investor to give you a certain loan amount at a certain rate, with certain points (or no points).

The rate lock is tied to a property address, so you cannot lock in your rate before you have a purchase contract. If you are refinancing, then you can lock at any time.

Once your rate is locked in, you have a commitment. That commitment cannot be broken if rates go down the next day. That would be like a husband asking his wife for a divorce the day after the wedding because a more attractive girl came along. That said, there are some lenders that will compromise if rates go down significantly. For example, if rates drop by .5%, they are willing to drop your rate by .25%. But if rates go down by .125% or .25%, don’t expect to get a lower rate. That is not a change that is worthy of a compromise.

The loan officer should never decide when to lock in the interest rate. It is your financing and your decision. Don’t stick your head in a bag and expect your loan officer to predict the future of rates for you. You must be the one to tell your loan officer when to lock in your rate.

After your interest rate is locked, GET IT IN WRITING. Failure to do so is a mistake on your part. How do you know the loan officer actually locked in your rate if you don’t get it in writing? What about the many people who were told their rate was locked, but then, to their horror, found out later that the loan officer failed to do so, and now they were stuck with a higher rate? Learn from their mistake and get your rate lock in writing.

For other vital tips like this, see Mortgage Rip-Offs and Money Savers. I suggest the paperback over the Kindle version, because the Good Faith Estimates cannot be read on the Kindle version. In this book, I put at least eight different (actual, real) Good Faith Estimates from banks and brokers with my comments on their junk fees, hidden fees, lender credits, and more.

If you found this information on mortgage interest rates to be useful, please pass it on by clicking the social media icons and/or emailing the URL to those who might be interested. Thank you.

 

Mortgage Loans to Get More Expensive

money purseIf you’re waiting till after the holiday season to button down a deal for a home purchase, you might want to rethink that strategy, because mortgage loans are rapidly becoming more expensive.

As I wrote December 3rd, interest rates are trending upward, and that trend continues. Today, we’re seeing 4.625% to 4.75% for the conventional 30-year fixed rate. But in addition, fees are also increasing.

In the near future, I will dedicate a post to explaining the mortgage loan fee increase and what you need to do in order to pay the least possible in fees. For now, be forewarned that if you want to bring less cash to closing and get the lowest rate for the lowest monthly payment, the time to sign the contract and lock in your interest rate is now.

Remember, you cannot lock in your rate/fee without a purchase contract, because locks are tied to a specific property address.

You can have your real estate agent write the contract for you now, lock in your rate now, but write the closing date for the end of January when you have more time to pack and move. Waiting to choose could cost you financially.

Please feel free to pass on this information/blog link to folks who might be affected. You’ll be doing them a favor by helping them save significant money on their upcoming mortgage.