Why are Rates Going Up?

Why are Rates Going Up?

So What the heck is going on?  If the economy is supposedly so bad, why are Interest Rates Still going up?
That’s a good question and there are a lot of people out there who get paid a lot of money to figure these types of things out.  As a Mortgage Professional I’m also asked to share my opinion on this topic.  I’m also bombarded with info on this topic every day.  A representative at one of our banks shot this out the other day and while extremely simplified I think he makes some good observations.  What do you think?

My Market Watch:  Man, if I’m a trader on Wall Street, I’d much rather put my money into stocks rather than bonds (which makes rates worse).  The Perfect Storm:  (1) Bernanke talks about QE and the desire to increase inflation albeit a controlled increase, (2) Greenspan comments that from an investment standpoint, stocks are at the most valuable level as compared to bonds in the last 50 years, (3) just reported that our present income tax rates, which were due to move higher on January 1st, will now be extended for an additional two years, (4) economic news from China indicates the labor market might be getting better, and (5) holiday spending is upon us.  I’d be betting on stocks too.

So there’s one pretty popular take.  It makes sense.  We’re still in a sluggish economy but there are signs that indicate the future may lead to inflation.  In inflationary times lower yield investments become less attractive.  Attractiveness of bonds, in part, affect the pricing of mortgage rates.  So what?  If you’re on the fence waiting for rates to go lower you may want to take head of that tingling sensation.  It might not be your legs falling asleep… it could be the market heating up.

Jeremy Beck,  Mortgage Planner at the GreenHouse Group
Jeremy@GreenMeansGrow.com   | 858-273-3639 
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