May 112015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

After a very quiet winter, volatility has returned to mortgage rates in a big way. Thirty-year rates have shot up about 3/8th of a percent in the past two weeks. This rapid rise has been harder to understand because it’s not related to the typical market forces we watch. US interest rates are rising primarily because European rates are rising.

The increase in Europe has been much more severe and seems to be related to the belief that European quantitative easing has cured all that ails the European economies. Whereas previous record low yields in Europe pushed US rates down, now they’re pulling them up.

An additional factor is the recent record issuance of US corporate debt. Corporations are racing to take advantage of debt financing before rates rise. Corporate debt also acts as a substitute for mortgage bonds.

The short-term market sentiment clearly has turned against low rates. While US economic data still doesn’t support higher rates, if you have a short-term time horizon, it would be risky waiting for rates to reverse. It’s quite possible when rates do dip that they’ll be a higher than today.

Sorry, the comment form is closed at this time.