Mortgage rates have been relatively low for quite some time now. Here are three things that may cause rates to move higher in 2018:
1 – Unwinding of the Fed’s Bond-buying Program
Since 2009, the Federal Reserve has purchased a staggering $1.7 trillion of mortgage bonds, and they’ve been the largest buyer of bonds in the market. This has had the impact of keeping interest rates very low. In October 2017, the Fed began reducing their bond purchases, and they expect to gradually phase out their bond-buying program throughout 2018. This may cause mortgage rates to go up.
2 – Growing Federal Government Debt
The growing level of federal government debt will lead to an increased supply of Treasury bonds hitting the market. This large increase in bond supply will take place simultaneously with the large reduction in bond demand that is resulting from the unwinding of the Fed’s bond-buying program as described earlier. This could cause interest rates to go up in 2018.
3 – Economic Growth
When there’s positive economic news, stock prices tend to improve, and interest rates tend to get worse. Recently, we’ve had many positive economic reports that indicate a very strong jobs market and record high levels of consumer confidence. Interest rates could go up if this continues throughout 2018.
That said, interest rates are still very attractive right now, and it may be a great time for you to consider a refinance or new home purchase. Contact me for more information.