By now, most potential home buyers have heard someone tell them that the interest rates for a mortgage will rise. The Federal Reserve has raised their interest rates in 2017, and they have said another increase will occur in 2017. But that has not happened yet. And the Federal Reserve has stated that interest rates will rise again in 2018.
When the Federal Reserve raises the interest rates, that increase usually trickles down into the residential mortgage market. Yet, mortgage rates continue to hold under 4%. How much longer the rates remain under 4% is something that my crystal ball has not yet revealed to me. But this has been revealed.
Mortgage Interest Rates Will Rise!
But here is another reason that rates will increase. And that is the bond market. This is a market that not all that many people understand, myself included. But here is what I have recently learned.
After the financial crisis of 2008, in order to help boost economic growth, central banks from around the world purchased bonds. Lots of bonds. The demand for these bonds caused the bond yield top decrease. And the decrease also forced mortgage rates downward. Then, in 2013, the Federal Reserve started to indicate that they may end the bond purchase program. And globally, the yields on bonds began to rise.
Then the European Central Bank did the same thing. And the yield on bonds increased again.
If (when?) the new tax plan is initiated, it will hopefully give a boost to economic growth. This will be a cause for future inflation, which may increase the budget deficit. Which would eventually push bond yields even higher. This is good news for investors, but not for home buyers.
Maybe you should buy your new home now.
If you want to learn more about bonds, do not call us, Bunny and Art Reiman. We are Realtors, not financial advisors. But if you want to learn more about real estate, call us at 732-598-7700, or visit our web sites, www.BunnyandArt.com www.55PlusInOcean.com www.55PlusinMonmouth.com
