Current mortgage rates expected to continue to Increase

This is the largest increase in eight years and certainly exceeds expectations. Mortgage rates for Monday morning opened higher as a result of this information. Although this is bad news for customers in the middle of a home purchase or mortgage refinance, this is certainly good news for our economy which really has been hurt by this sector. Hopefully we can start talking about the props this will lend to our economy rather than the trickle down mess it has given us.

After living in South Florida for the passed several years, I have seen first hand the impact that the slow down in new construction has had on our economy. The trickle down theory applies to all of the jobs surrounding new home construction. Not just general contractors or carpenters or brick layers but other individuals further away from construction. Restaurants, movie theaters, other forms of entertainment all take the hit. I recently talked to a full time sushi maker who described his reluctance to purchase a home because his sushi customers were only buying sushi for dinner instead of lunch. I feel the small business owner is the first to feel the brunt of economic downturns because usually they do not have the reserves or the resources to endure a long economic downturn.

Even though current mortgage rates are at historic lows, a first time homebuyer will not take the chance on home ownership if he lacks confidence in his ability to pay that mortgage. If you look at the top four foreclosure states, Nevada, Arizona, Florida, and California, these are states with a high percentage of small business owners.

This information today is just another indicator that current mortgage loan rates should begin to climb. Demand is increasing. Usually mortgage lenders will latch on to good news and raise rates quickly, and digest negative news and bring mortgage rates down slowly. In the passed two weeks we have had much more positive news than bad. Last week a customer called me up and said he wanted to lock his loan because the Dow was going to break 9000. It was a psychological barrier for him, and in retrospect it was probably a psychological barrier that was broken for the bank as well. Interest rates jumped that day.

Despite improvement to mortgage rates on Friday, he locked in 4.875% paying a point on a 21 day lock on his mortgage loan program which appears to be gone today.

As a rule of thumb for my customers I always tell them, “Good news on the stock market is usually bad for mortgage interest rates and vice versa”. We will see.

Written by Preston Ware
http://www.prestonware.com/
First South Mortgage 704-542-8057
My email is preston@prestonware.com.