Wednesday, August 24, 2011
Interest Rates Are Rising!
You may have read a Post that I created on 8/10/11 talking about the reason for the rapid improvement in the interest rates under the article, “Strike While The Iron Is Hot!”. If you have not read it, then I’d highly recommend checking it out by clicking here and look under the Blog Archive.
Well, this is a follow up post to show you what is currently happening and why. Take a look at the Bond Chart below for better illustration. The Bond Market has been steadily declining since last Thursday (8/18/11) and further eroded this week. Why is the Bond Market tanking when we keep seeing negative economic reports (especially, when bonds normally thrive with negative news)? Last Thursday, most of the investment dollars went into purchasing Treasuries (see the other Graph below), which is another reason to be careful dealing with a Loan Officer whom follows the wrong index (as you can see, they sometimes go the opposite direction). On Friday, the Bond and Treasury Markets maintained themselves, while the DOW dropped. Once Monday (8/22/11) came around, we continued the negative economic news. But it was announced the World Economic leaders will be meeting this week in Jackson Hole, WY, which Fed Chairman, Ben Bernanke, is scheduled to make a statement on Friday (8/26/11). This created a stir amongst the Traders that an announcement or hint of QE3 will be announced. As you will see the decline in the Bond Market and the rise in the Stock Market (the DOW’s 5 day chart is below to view too). As a result, interest rates have been rising this week because of the Trader’s bets that Mr. Bernanke will be announcing a QE3. Again, if you read my article, “Strike While The Iron Is Hot!”, then you saw the repercussions of a QE3 will have on the Bond Market and Interest Rates.
For those of you whom took advantage of the low interest rates, then I’d like to congratulate you for taking action. Interest Rates are still low, but we cannot say for certain that they will remain at these levels for very long. Again, in the article, “Strike While the Iron Is Hot!”, then you read that interest rates have fluctuated between the low 4% range and the mid-5% range since 2008 when the Fed reduced the Fed Funds Rate to 0-.25%. All great rates and low, but they are fairly wide in their spread.
Contact Mike Bjork, Sr. Mortgage Planner with First Cal Mortgage, via his website at www.CaliforniaMortgageTips.com, if you have any further questions; or need any assistance with your refinance and financing your home purchase.