What You Need to Know About Interest Rates

Don’t wait to buy a home or refinance your mortgage—interest rates are on the move. How do interest rates work? How will interest rates impact you? I’ll go over everything today.

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You might not want to wait to buy a home or refinance your mortgage. Why? It all boils down to interest rates.

Here is a little interest rates 101. Mortgage rates are tied to the bond market, and are mostly pooled into one big bond called Mortgage Backed Securities (MBS for short). The MBS bond is highly sensitive to inflation and the fear of inflation. Since there has been little to no inflation during the crash, we have seen historically low rates.

After the election, the bond market overreacted to the risk of inflation under the upcoming president. It’s clear that it was an overreaction because the bond market has started to settle down a bit. However, experts say that the bond market will not settle down all the way. Those historically low rates are a thing of the past. 

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Interest rates will not be as low as they were before the election.

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There are a few other factors at play here. For example, the Fed really wants to raise short-term mortgage rates in December, provided that the economy can withstand an increase. Not only that, but OPEC, a major oil company, has decided to slow down its production, which the bond market does not like either.

Ultimately, you have to do what’s best for you. If you wait to time the market, that’s like waiting for a crystal ball and complete control of the global economy, and you’re not going to get either one.

When you’re ready to make a move, get with a good professional. Get information from the professional and not the Internet. Do what’s best for you and your family. You can’t put your plans on hold forever and wait for interest rates to go back down; rates will not go back down to where they were.

However, keep in mind that, historically speaking, anything under an 8% interest rate is a good rate. Anything under 6% is phenomenal.

If you have any other questions about interest rates or the real estate market, just give me a call or send me an email. I would be happy to help you!