“3 Insider secrets to help you predict where interest rates will be headed”
While this seems like a promising headline, for the last few weeks the mortgage backed securities market and the stock market have resumed their previous predictable pattern of behavior which is good news, or is it?
For years those in the mortgage lending industry were able to with relative confidence learn to predict where interest rates were headed by what was happening, in general, in the stock market and the bond or treasury market. I don’t at all mean to suggest that anyone could accurately determine what rates would be but those with experience would “study the tea leaves” and make a relatively good prediction and hit it more times than not.
1 - When bond yields are up mortgage interest rates will move down. Even though these two are not related but are distant cousins, it was a pretty reliable assumption.
2 - If the stock market is doing well the bond market tends to react in the opposite direction. This used to be reliable because if investors liked putting their money in equities (stock) they would usually take it out of securities (bonds) to do that.
3 - Talk about the threat of inflation and the bond market would sell off and rates would rise within a few days and stay up in a protective mode until the conversation changed or inflationary fears subsided.
For the past year or so, these have not been dependable measures to predict where interest rates are headed due to the overall lack of enthusiasm and trepidation about the financial markets. Interest rate behavior was pressured down, they stayed there & nothing negative about the market would have much of an effect on rates. It has been a hay-day of low, good rates so to speak. . .
My friend Ray Avanzino presents a very straight up picture of current market conditions, check out his work. Bottom line, the fear of inflation surrounding the increase in federal debt is increasing and therefore the bond market has sold off more dramatically than ever in the past. This usually means higher rates and indeed they have gone up quite a bit in the last 2 weeks. However, higher rates threaten our fragile recovery so now the pendulum is poised to swing the other direction so as not to slow down or stall what little recovery we might have going.
The lending industry is doing all it can to get clients locked and closed before major increases threaten already weak business. So if you are in line, hopefully you have a skilled agent who can see these trends developing and will tell you when to achieve your home run for this cycle.
As usual, please comment, don’t be afraid, you’ve got a couple of minutes, just do it!
