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Interest Rates edge up, more increases to come

Interest rates for buying a home on the Palos Verdes Peninsula moved up this week with additional increases expected next week.The following are excerpts from the newsletter on interest rates published by HSH Associates :

 

"With the Fed's unstated date for the "liftoff" for raising interest rates a moving target, and with the factors influencing that date driven by emerging data, we've got a nice recipe for more volatility in interest rates, and we are seeing this more and more of late. We noted this in HSH's last Two-Month Forecast; if you missed it, here's the crux: "Although the Fed hopes to express more clearly that any change in policy would be driven by data, such a stance would increase the risks of interest rate volatility if a given report is stronger (or weaker) than anticipated."

 

As it seems the global economy may have bottomed and is on a mild path of improvement, and with the hope (if not the promise) of more to come, interest rates have tended to be firmer of late, rather than slipping back to January lows. Add to this mix a U.S. economy which seems to be only nicked so far by the strong dollar's impact on exports, but supported by cheaper energy and imported goods costs and ongoing strength in labor markets, and any report which suggests that the time of liftoff may have moved closer will push mortgage rates higher. This week's solid employment report for February is case-in-point.

 

 

After spending the early part of the week on a down note, mortgage rates were up just a whisker for the week as a whole. As Friday's market rout pushed up the yield on the influential 10-year Treasury to a daily close last seen at the end of last year, mortgage rates next week will feature a more pronounced uptick.

 

 

In the context of relative stability, interest rates have nonetheless turned considerably more volatile on both the downside and up since the turn of the year. Mortgage rates may be moving up, but real and regular upward traction remains limited and will until the Fed seems ready to embark on the next monetary journey. For now, the steady and regular improvement in the labor market has probably moved the date of the first change from mid-summer to September (where it ended last week after Fed Chair Janet Yellen's semi-annual testimony before Congress) to something more akin to June to mid-summer time frame.

 

Without an explicit date for the markets to focus and plan around, get used to seeing more of this compression and expansion of the time horizon with any significant data that is stronger or weaker than expected. Because the Fed will be changing the language it uses to describe a like time period (or eventually, the size of any action) volatility (and the likelihood of firmer rates) can be expected in the lead up to a Fed policy meeting. The next such get together happens in less than two weeks and will also be accompanied by an update to the Fed's projections for the economy and the path for future interest rates.

 

As a footnote to all this, one item to keep in mind that the Fed is still "recycling" inbound money from its maturing Treasury and MBS holdings, providing some additional downward pressure on interest rates. This beneficial process will come to a close when the "liftoff" comes.

 

Mortgage rates are going up next week, especially early on. A much lighter calendar of new data won't give markets much to chew on, so rates may start to settle back a little as the week progresses. Still, at the end of it all, we are likely to see a lift of 8-10 basis points, likely enough to become new 2015 highs for rates."

The following are interest rate quotes from American California Financial:

 

30 Yr Fixed FHA

Rate

APR

 

       

3.375

4.506

Details

       

 

 

 

Conforming 30 Yr Fixed up to $417000

Rate

APR

 

       

4.000

4.120

Details

       

 

 

 

Conforming Jumbo 30 Yr Fixed $417001 - $625500

Rate

APR

 

       

4.125

4.235

Details

       

 

 

 

Jumbo 30 Yr. to $1.5 Mil

Rate

APR

 

       

4.125

4.219

Details

       

 

 

 

Jumbo 7/1 ARM $1.5 Mil (higher loan amt available)

Rate

APR

 

       

3.625

3.482

Details

       

 

For more information about Palos Verdes and South Bay Real Estate and buying and selling a home on the Palos Verdes Peninsula, visit my website at http://www.maureenmegowan.com . I try to make this the best real estate web blog in the South Bay Los Angeles and the Palos Verdes Peninsula. I would love to hear your comments or suggestions.

Comment balloon 2 commentsMaureen Megowan • March 07 2015 03:03PM

Comments

Hit the nail right on the head - improving economy means higher rates (at least for now).  Now is the time to get out there especially with the potential of inventory increasing.

Posted by Andrew Scherer, Real Estate Representation At It's Finest (Approved Mortgage Group) over 3 years ago

There should be no worries, money is still super cheap for those who need to borrow.

Posted by Winston Heverly, GRI, ABR, SFR, CDPE, CIAS, PA (Winston Realty, Inc.) over 3 years ago

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