Interest Rates are on the rise!

By
Real Estate Mortgage Broker with Morgan Financial

All signs point to rising interest rates.  The inflationary fears have started to materialize and have affected the Bond markets.  Over the next few years, Trillions of dollars will be pumped into the economy, and many fear that this will cause hyperinflation.

Because interest rates are determined by the price and yield of Mortgage Backed Securities, when consumer confidence comes back, there will be a flight away from fixed income instruments, and towards equities or stocks.  In other words, money will stop flowing towards bonds, and will start moving towards other items that will more likely beat inflation. 

While bonds offer a fixed rate of return and are stable, in times of inflation, your rate of return may not be beating inflation.  When there is less demand, the price of the bond will go down, and the yield will go up; the yield is the interest rate.  Again, this means that interest rates are headed up.

What does this mean?

                Rates are still low; however, we know that they are heading up.  If you know ANYONE who is looking to purchase a home or Refinance their existing home, it is time to let them know that they need to act soon.  A rise in interest rates will mean decreased purchasing power and increased costs.  Rates are still relatively low, and prices are still low; it is still a great time to buy a home!

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Rainer
231,877
BLR Guy
BLRGUY(Beach & Luxury Realty Inc)

It is inevitable that interest rates will be going up...let's just hope they aren't around the levels of the Carter administration!

May 31, 2009 07:07 AM
Rainmaker
223,644
James Angelo
Florida Homes Realty & Mortgage LLC

There is always a change in interest rates -  thanks for the info.

May 31, 2009 08:52 AM
Rainer
18,904
Joe Harris
Morgan Financial

Agreed, I too hope that we do not see the super high rates that were seen in the late 70's and early 80's.  In this global economy, rates like that would be catastrophic to the world economy.

 

May 31, 2009 01:09 PM
Rainer
18,904
Joe Harris
Morgan Financial

James -

As someone who watches interest rates on a monthly, weekly, daily, and hourly basis, I understand that rates fluctuate.  However, the purpose of this blog was to let people know that I am not talking about a daily phenomena, but a trend of ongoing increasing rates.

May 31, 2009 01:12 PM
Anonymous
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Rainer
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Joe Harris

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Additional Information

As a Brevard County Mortgage Expert, Joe writes on all things related to the mortage industry and other related events for Brevard County, Fl.