Mortgage Update for January 23

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Given that Monday was a holiday for Martin Luther King, Jr.’s birthday, the markets were closed and the falldown from the end of last week wasn’t followed up right away. Instead, everyone got a little bit of extra time to relax over the long weekend and prepare for more volatility in the new week. On Thursday last week, mortgage rates staged their first big climb in a while, making some think the historic low rate period had finally ended and climb was in order. However, by Friday’s close those same rates went nowhere, completely dissipating projections that the rates were indeed going to start their expected climb again.

Everyone is still expecting Tuesday’s market opening to resume the march upward, removing the chance for lower rates and pushing the general home-lending atmosphere closer to 4 percent interest rates soon. Because of these facts, strong messaging and marketing from lenders and brokers to consumers are aggressively pushing that the low-rate period is ending, and it’s time to lock in savings now versus waiting any longer. There is some truth to this sentiment seasonally. As we get closer to the Spring, home-buying activity generally increases with the warming, better weather. That in turn increases loan demand which pushes rates upward as well. So it is reasonable to expect that the lows of 3.375 percent and similar are going to disappear for a while.

Tuesday’s rates will start the day with 30-year fixed rates averaging 3.5 percent flat while the 15-year counterpart opens between 2.75 percent and 2.875 percent. In terms of alternatives, the five-year adjustable rate mortgage average also hovers between 2.625 percent and 3.25 percent as well.

What could dampen rates back down again, however, is if the government fouls up spending plans so bad that it causes a new recession downturn. Granted, this won’t happen in one day, but with the continued debt limit negotiations and stop-gap spending conflicts, government can still find a way to mess things up over the next few months. That in turn could cause another ceiling on how far rates climb as people simply won’t have the money or credit to spend on new home-buying.

About John Krystof

John Krystof writes about personal finance and money matters for He was born and educated in Central Europe, but presently resides in New York City.

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