What’s Really Happening with Interest Rates?

Filed under: Mortgage News

In today’s video, I’m sharing some geeky charts so we can what is happening to interest rates and where we stand right now – and where I think we are heading (based on my opinion).

Breaking Down Interest Rates

In this chart, we are looking at the Fannie Mae bond – the actual source where rates are set. Note that on the chart “up” is good for interest rates and “down” is bad for interest rates.

When March 2020 happened, we didn’t know what to expect with interest rates because the market was all over the place due to the pandemic. Rates starting hitting all-time low records, then things have gradually been changing.

Beginning of 2022

At the beginning of this year, we started seeing interest rates starting to worsen – which is no surprise because of inflation. Now, we’re back at the same point where we were in March 2020. We are starting to see 30-year fixed rates in the mid- to upper- 3% range. It’s been up and down with rough days in interest rates, then bouncing back again.

This is About Inflation

Keep in mind, charts aside, this is all about inflation. There’s no question that inflation is the arch-enemy to mortgage rates. The logic makes sense: when inflation goes up, then investments start to lose money. Big companies are starting to see diminishing returns on their investments.

Let’s see what happens. The headline inflation number that just came out shows that we are at the highest in 40-years. But the bright spot is that in the month-over-month report (November vs. December), the inflation was actually a little lower than anticipated.

As the Fed gets more involved, it will cool the economy and that should bring the inflation down… which should improve mortgage rates. But who knows how it will play out? We have a 4 to 6-month window to see how it goes.

The Reality of Current Interest Rates

Long story short, I wanted to show the reality of what is happening with interest rates. You can see what is happening in the chart when there is Fed stimulus vs. the Fed not being involved. Rates are still great if they are falling in the 3% range right now – there haven’t been many times in 20 years that I’ve seen interest rates this good.

If you have mortgage questions, feel free to contact Bill Provost at Franklin Loan Center in Temecula. 760-282-4415 or bill@homeloanpartner.com.