If you’re a home buyer in the Las Vegas area, that has been able to get a home under contract and are expecting to fund the purchase with a loan, you may be surprised at how fast rates have jumped in the last couple of months. What most buyer don’t know is why. We will try to lightly touch on why rates are going up, where they are expected to level off and what you should expect.
In late November 2008, the Federal Reserve started what is known as QE1 (Quantitative Easing, an unconventional monetary policy of buying down interest more or less). By December 2012, the US was in the middle of QE3, which consumed a targeted $85 Billion dollars a month in commercial housing debt. With all this money flying around, the idea was that banks would be able to keep the interest rates low, so buyers could purchase their homes to keep the economy moving. In June of 2013, it was announced that these purchases would start to “taper” due to positive growth in the economy and lower reported unemployment. The results of this we have seen as an immediate drop on the stock market starting June 19th, and an increase of mortgage rates.
The information stated above is a very basic overview of why rates were at record lows and why we have started to see them climb. As a REALTOR, it’s my job to keep in touch with lenders so that I can keep my clients up to date on market trends. In the case of mortgage interest rates, you can expect a slow but steady climb to about 5 1/2% by October of 2013. The only silver lining to this is that rates are still at historic lows in comparison to reports by Freddie Mac http://www.freddiemac.com/pmms/pmms30.htm currently showing that we have gone back to the rates of about 2009.
What we can expect is determined by public policy and economic reports that help to shape those policies. In general, if the rates keep going up, we should be in a healthier economy and if they go down it will be as a result of economic stimulus designed to strengthen the ability of You and I to feel better about spending our money. As a home buyer that is a HUGE PLUS!