No one can predict for certain what will happen next. Whether it be the world, weather, disaster, or whatever. No one could have predicted the pandemic, and the massive halt to the world economy, travel, and hospitality sectors, or unemployment, or the government having to step in to shore up the economy.
The big question everyone wants to know is: what are rates doing next? What options do I have right now? What if I want to purchase or re-fi, when will I know if I’m ready? It all depends on the usual factors, how to you much do you make, how much you have to put down, what’s your credit score, do you need help from a family member? The answer to what are rates going to do is still in flux.
So what’s the next step? I suggest finding a lender, and find one that will shop for rate. Most people go to a lending broker, as they can shop for you to find the lowest particular rate you qualify for. The lender will wand to review terms as well as your ability to repay the loan. And remember that the lender wants to sell you a product that is sell able on the secondary market so funds can be replenished to them to make new loans
Rates. It’s a tough one to foresee the exact future now. No one can predict weather events, or political upheavals in the world. No one predicted the pandemic, yet disasters and upheavals can affect availability of funds for lending and these events can lead to tightened credit. Of course, all are governed by risk as well.
That’s why we look to the performance of the 10 year bond, which is predictable. The scaling back (The Taper) has begun in the Fed. The buy down of government loans and mortgage backed securities is being scaled back right now, to the tune of $10 billion less this month than last month and $5 billion less for mortgage backed securities
The Taper will back off until the Fed no longer buys these securities, which is scheduled to cease next June. We already have indicators of how bonds will react as we track them. As an example, the 10 year bond started out at .53 at the height of COVID, now it’s hovering between 1.44-1.54, meaning it’s gone up a point in 18 months and that’s significant. By not buying mortgage backed securities, you can bet that the 10 year will go up, and therefore rates will go up.
Risk drives the rates of US backed securities or US debt. It’s “big boy” math. These are your indicators, whether you spend what you make (living paycheck to paycheck) or manage your finances so you can save and afford to buy a house. This much is fairly certain rates will go up and look for that to happen over the next 6-8 months.
Now might be a good time to lock in your loan, call me if I can be of help.
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