It has now been a few weeks since the election, and everyone is trying to predict what a Trump administration will mean for the economy. But it is really the ‘market’ and its impact on interest rates that is the best leading indicator. Investors view U.S. Treasury bills as the safest investment. If Treasury prices go up, the market and investors are deciding to put their money into safer investments — U.S. Treasuries. If Treasury prices go down, the market and investors are putting their money into other investments, like stocks, viewing them as a more profitable option. A sell-off of Treasuries after the election has done the latter, moving Treasury prices lower but Treasury rates higher (there is an inverse relationship between rates and prices).
So what does this mean if you are interested in refinancing your mortgage or buying a new house? Interest rates are currently off their historically low rates, going from 3.25% a few months ago to 4% today. Even with this rate increase, you still might save a few dollars per month on your mortgage if you refinance. Contact us and we will run the numbers.
If you are thinking about purchasing a house, the increase in rates is deflating your buying power. Your per month payment will be a little higher, unless property values come down — that isn’t expected in the D.C. area even with the market cooling a bit. But higher interest rates will slow down the housing market, helping to keep prices in check. So if you are considering buying, rising interest rates is both good and bad: good because it will slow down the increase in home prices but bad because you will be paying more every month for a mortgage.
Of course another large variable in mortgage rates is the Federal Reserve. Inflation is the Fed’s biggest worry with the economy continuing to grow. This week, the Fed announced that it will raise rates, usually driving mortgage rates up, because Treasury rates will increase with higher interest rates from the Fed.
The bottom line is that many things influence mortgage rates, and it is helpful to have an expert available to answer your questions. If you have any questions, please don’t hesitate to contact us. We can help answer any of your mortgage questions.
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