What’s going on in the mortgage market?

 

As I’ve said in other articles, we are not in a ‘normal’ mortgage market. Without boring you with advanced economics (where I learned to enjoy coffee), here is a little background. Rates on mortgages are largely influenced by the bond markets. Specifically on the yield of the bonds, as opposed to the price. If the yield on bonds goes up, our rates will follow, and vice versa. Here is where I watch the bonds: http://money.cnn.com/markets/bondcenter/ As you can see by the top box, the yield curve is not a typical upward sloping curve you’d expect to see on a graph. In a normal market, the longer term bonds (those with a longer fixed period) would have higher yields. Right now, that is not the case and that is why I say that we are not in a normal mortgage market. As of today, a 30 year fixed mortgage is priced out at around 5.875%, and while this is not an advertisement, I’m going to try to be safe and tell you that the corresponding APR (another topic altogether) would be approximately 6.17%. Ignoring the APR, historically, 30 year fixed mortgages should migrate to around 8%. I believe when the yield curve comes back around to something more historically representative, that’s where the fixed market will be.

So, if your question is “What are rates doing?” check out the link above and look at the bond yields. Not the prices, but the yields. Unless you decide to track them, don’t worry so much about the number as the direction of the graph. If you want to get a little farther into the economics, come on over to the thread: http://www.lanebailey.com/forum/index.php/topic,13.0.html I’m not graduate level in economics, but I’ve learned a lot about the correlations between the markets and our mortgage rates.