Mortgage Rates are on the Rise

Advise your members who are "on the fence" regarding a mortgage refinance to consider moving now, before rate rise further. But consider selling them to Fannie or Freddie so you aren't "holding the bag" for a bunch of low-yielding assets a couple of years from now. However, if you are retiring soon, I wouldn't lose sleep over it because it becomes someone else's problem after you leave to travel around in your new Winnebago.

We have seen Mortgage rates rise in the last couple of weeks. Where will they go from here? Of course, no one has found a reliable way to determine which direction rates will move. However, it appears that investors are willing to take on more risk and move out of the safety of treasuries, lessening demand. While Mr. Geithner denies it, the Fed is monetizing debt by buying treasuries, and we are faced with unprecedented deficits. Inflation is a real threat. . . throw in a pinch of the possibility that foreign governments (read China) may shy away from buying U.S. debt and you have rates on their way up. We are discussing long-term rates here, but short-term rates are likely to follow. The Feds have recently said that they will do what is necessary (increase the target lending rate) to control inflation.

There are 10 year and 30 year Treasury auctions on June 10th and June 11th. Many consider these auctions to be an important bellwether. If demand is low, rates will increase in order to attract investors, and mortgage rates will follow.

Here's another way I know rates might be going up - our brokers are desperately trying to sell us mortgage-backed investments that they own. A restraining order may soon be necessary.

Tom Dluzen