Let’s talk interest rates…again

“Keep your eye on the ball.”  I can’t seem to get away from the sports metaphors.  The “ball” is interest rates.  Keep your eye on “interest rates”.

Why?  Because despite the Federal Reserve raising the federal fund rate by another 25bps in December, the 30 year conforming rate has recently gone from 5% to 4.625%, and is now 4.5% according to Prosperity Home Mortgage in recent rate quotes.  For every one percent the interest rate moves, it effects your buying power by ten percent.

What’s caused this?  There are many reasons, to include:  global geopolitical pressure and uncertainties such as trade wars, the advancing of Brexit in the UK, plummeting oil prices, the consensus amongst many that the Federal Reserve has acted too quickly in increasing interest rates and evidence of a slowing U.S economy, with many predicting a U.S recession by 2020.

Happenings like these have caused financial market uncertainty.  Investors both in and out of the U.S. look for safety in such things as U.S. Treasuries, bonds, and gold, to name a few.  As money enters the U.S. Treasuries, it drives the rate of return down.

What to watch?  The stock market and the ten year T-Bill;  when folks leave one they often go to the other. The ten year T-Bill has decreased recently from 3.24% to as low as 2.43% (25%), the Dow has recently decreased from 26,951 to 21,712 (19.43%).  The 30 year rates generally respond to the 10 year treasury rate.

Why does this matter?

1) If you’ve been looking to buy but were discouraged by the rising interest rates….now’s the time to prequalify at the lower interest rate.

2) If increased interest rates have discouraged you from buying, take another look at today’s rates.

3) Sellers should know that buyer activity is likely to increase in this window of opportunity.

Let’s talk more.  Call me at 703-362-7764 anytime.