I heard that mortgage loan rates are going up. Does that surprise anyone?
Yes I heard that too. 7% by next year. The mortgage companies have given up enticing new buyers and going to start trying to recoup losses by raising mortgages.
I hear its not the govt raising the rate, it will be the mortgage industry.
Longterm rates are competitively constrained by the treasury bond yields and mortgage backed security (bond) yields.
Anybody tells you they have a reliable crystal ball... ESPECIALLY if they swear rates are going over 7%, by some discernable certainty... cover your wallet, turn, and run (don't walk!)
I just read an article about it. It could be an emotional trigger responce article aimed to start a flurry of sales *before the loan rates go up* or it could be true. It would make sense if they do raise rates. Slashing the rates isnt helping them much.
I doubt it...rates will likely bump around in a small range from the high 5's to low 6's over the next year.
Wasn't it the last round of recession/inflation where the rates ended up running up to 12, 14%?
Listen to Dave. Treasury and Bond yields dictate the mortgage rates. Company to company differences are based on the particular company's risk premium and tolerances.
You can only predict the rates if you know the yields on Bonds in the future (and they're affected by the stock and commodities markets, so good luck).
I second what Dave and bdpeck-charlotte said. And I REALLY second the idea of wishing good luck to predicting rates in the future!!!
Bottom line, all interest rates go up and down all the time - that's the dynamics of markets.
Watch the inflation rate because bond prices trend to fall and yields rise with rising inflation.
With energy prices rising as well, it's likely that consumers prices will also go up because it's costing more and more to produce and transport the goods.
For these reasons, I think mortgage rates a year from now are likely to be higher than present, but it would be pretty silly to name a figure. There are just too many unknowns.
A friend of mine has been watching the daily mortgage loan rates since he would like to buy a house. Seems like the rates had been on an upward trend. So he thinks he will until the rates stablize a bit. Sounds like he just might be in for a long wait....
It *REALLY* all depends on what timeframe your friend is watching and dwelling on interest rates. In the last few days rates have indeed increased, so if he is watching from "an itchy trigger-finger" perspective, he may be feeling like all is going to hell in a handbasket.
From just a little broader perspective, however, rates have bounced off a a fairly long & steep downward trend (as is a very natural and expectable behaviour,) and statistically speaking; once a trend has been established any 'correction' TENDS to revert back to the established trend (statistically around 2/3 of the time... and the other 1/3 is naturally what any exceptionists will point to.)
Watching interest rates with "market timing" is futile in regards to homebuying... it is arguably the WORST thing to try to focus on (it is certainly the thing your friend has the least control over!)
Focusing on finding a nice home, with a motivated seller, can result in exponentially better results and savings than dwelling on interest rates and grabbing whatever floats down the pike when your friend thinks "rates are just right."
"From just a little broader perspective, however, rates have bounced off a a fairly long & steep downward trend (as is a very natural and expectable behaviour,) and statistically speaking; once a trend has been established any 'correction' TENDS to revert back to the established trend (statistically around 2/3 of the time... and the other 1/3 is naturally what any exceptionists will point to.)"
Dave, could you please provide me a source for this claim because it strikes my naive mind as utter nonsense?
That sentence had many subparts... which is striking in your mind?
"statistically speaking; once a trend has been established any 'correction' TENDS to revert back to the established trend (statistically around 2/3 of the time... and the other 1/3 is naturally what any exceptionists will point to.)"
Particularly the parts about 2/3 and 1/3.
Particularly the parts about 2/3 and 1/3
This is from my prior life as a hedge-fund trader. I'm sure if we dug around I could find analytical commentary from others as "resources" for you... HOWEVER, for now simply exchange the word "statistically" to "observably", and pull up any scale of broad market price/time charts.
Trends (in either direction) tend to remain in place measurably approximately 2/3 of the passed time, on average over many observation periods, and spend the majority of the remaining 1/3 of their time vaccillating.
Its kind of like asking for a source to support a statement about the sun's apparent rising on the horizon... I'm sure its out there, *AND* its easier to just look.
OK, I was pretty sure you had made it up yourself.
I've pulled up a graph of national average contract mortgage rates covering the years 1963 - 2007: see bottom most chart in the link below.
Would you kindly point out to me how I can tell the 2/3 of the time period shown on the chart where the trends tended to remain in place from the other 1/3 where they spent their time vaccillating?
I don't think all this has anything to do with the sun rising in the morning -- the sun appears to us to rise because the earth rotates about its axis, which is a physical phenomenon and not a statistical trend.
Here is a link that might be useful: Interest Rate Trends
PERFECT selection, thanks!
We're currently, immediately in a vaccillating short-term period, which is pretty easy to see in the 3 months chart.
As you pull back further and further, it almost belies my statement to the opposite extreme... where almost 100% of the visible price action lies in a consistent trend in one direction or another.
If you could pull back even further, to a 100 or 200 year chart, you would once again see a portion of the price prints in a vaccillation/consolidation pattern as well... particularly from the 1940's through the late 1960's.
As with the sun "appearing to rise on the horizon," the aggregated financial behaviours of human crowds is also a physical phenomenon, as it is affected by the entrainment of various inescapable cycles... which thusly are reflected in the observable participations of the financial markets (as well as other ways.)
What you are saying is that it depends on the scale you look at, which was not part of your original formulation. But why should the 3-month scale be any more or less significant than the 40-year or the 200-year scale? And, more importantly, which time-period is most meaningful if I want to predict where interest rates will be next year, which is what the OP originally asked?
As for the "entrainment of various inescapable cycles" which supposedly makes "the aggregated financial behaviours of human crowds" a "physical phenomenon" comparable to the conservation of initial angular momentum imparted during the earth's formative phase (which is what makes it turn), could you please explain what they are? I have no clue.
We bought our first house in 1977 as the mortgage rates were going up. We were thankful that we were able to get a mortgage (30 year fixed) at 8.75%, especially when they continued to climb into the double digits! So, it is a matter of perspective.
We had two salaries at the time, but knew DH was probably going to get laid off from his teaching job in the spring. We had been very thrifty (paying not only our apt. rent for two years, but socking away 1.5 times that amount every month for down payment). We crunched the numbers, figured that because we had more than 20% down that we could avoid PITI escrow, and could maintain our living standard with plenty of margin on one salary. Which we did.
The house we purchased was a modest, 3 bedroom, 1.25 bath ranch. Coming from an apartment, we thought it was HUGE!
We continued to save, DH went back to school, started a second career, we had DS#1, I worked part time, had DS#2, and then we moved to a bigger home in 1985. In 1990 DS#3 surprised us all by arriving on the scen, and in 1995 we moved again to our present home.
Throughout all this, we kept track of the numbers, always went with a significantly smaller loan than what the bank said we could afford, and made sure we could always afford it on one salary.
Our first house seems really tiny now, and our first mortgage seems huge now. We refinanced about five years ago to a ten year fixed @ 4.87%. Our house payment stayed the same as it had been at a bit higher interest rate over more time. Since we could afford the monthly payment at the old rate, it made more sense to keep that monthly payment while reducing the interest rate AND shortening the length of the mortgage. A win-win situation. And, it is ALWAYS a matter of perspective.
I remember when gas first went over $1.00 per gallon..... that was terrible! Now it doesn't look so bad, does it?
Just be smart, don't borrow more than you can afford, separate "need" from "want," and never buy on impulse. (Go grocery shopping after dinner, not before!) Not that we always accomplish that, but it's the goal.
Greed and lack of planning can really shoot you in the foot. Set money aside for the unexpected!
What you are saying is that it depends on the scale you look at, which was not part of your original formulation.
Sure it was. My 1st didn't reference timeframes at all, but my 2nd almost entirely did.
But why should the 3-month scale be any more or less significant than the 40-year or the 200-year scale?
Its significant to the degree of the timeframe you are trying to read. The 5-minute price action is irrelevant to the yearly timeframes, and the 30 year cycles mean little to intra-day... etc.
And, more importantly, which time-period is most meaningful if I want to predict where interest rates will be next year, which is what the OP originally asked?
That's conjecture... the OP asked very little.
I heard that mortgage loan rates are going up. Does that surprise anyone?
Some of them, sure...
Circadian rhythms, menses rhythms, payroll rhythms, tax cycles, school cycles, etc. etc. Each has the potential of small (or in some cases even large) effects on relatively unique individuals, but when the cycles "entrain" (which is like the compounding of several wave frequencies) the impacts can be very significant, and clearly observable in the cycles of the financial markets that humans participate in.
Very WISE advice, that is!
You have ducked my question, Dave, which was "which time-period is most meaningful if I want to predict where interest rates will be next year"? Even if the OP did not ask it, I did. If we are going to talk intelligently about corrective trends, don't we first need to know what time-frame is relevant?
Specifically, since mortgage rates have been low for some time (which you claim is a "very natural and predictable behaviour although you don't explain why), how can we determine whether their recent upward movement is just typical of the 1/3 of the time where you say rates spend vacillating, or the start of a sustained upward trend typical of the 2/3 of the time where you claim rates exhibit trend behavior?
If it's the first, then we're just seeing an upward tic that won't impact rates next year. If it's the latter, then we can expect mortgage rates to be higher next year.
So which is it?
feedingfrenzy and Dave (Leverage Planner, formerly Mortgage Guy, former-formerly Hedge Fund Guy): Stop! Please! MEGO, MEGO!
Is it just me, or could there possibly be some kind of subtle hint in Sue's post?
OK, no more ff posts on this thread.
Sure, with apologies... no intentional duck, just rushed & missed that.
The answer is not so universal & simple as to broadly brush across all possibilities. In order to predict anything in market behaviours, first of all, it is critical to remember that the predictability is one of relative PROBABILITY, not absolutes.
One metaphor I use and teach in the understanding of human market cyclicality is the similarity to music. Music is nothing but an aggregated blend of frequencies... from the most extremely small frequency (which is heard as a very smooth high-end note) to the extremely large/long frequency (which is heard as a base tone, or a drum beat... or even, arguably, the space between songs, or albums, or even generations themselves.)
If you are familiar with the tendency of a particular type of music to gradually build a frequency tempo to a relatively expectable point, and then shift... with some degree of predictability... then you can listen to a completely new musical piece of the same artist with fairly reliable anticipation of common patterns and progressions.
BACK TO NEXT YEAR'S INTEREST RATES;
There is no independent, non-related time period that is "most meaningful" for a future prediction... but rather how the current market behaviours fit into the standard behaviours overall.
There *IS* a scalability factor however... you won't very reliably be able to anticipate probability of behaviors in a 30 day period by looking at the price action within independent 30 minute periods. Whatever time frame from the current to the future you wish to "read" you need to bracket with a suitably large collection of similar time periods into the past.
Specifically, since mortgage rates have been low for some time (which you claim is a "very natural and predictable behaviour although you don't explain why),
Hopefully you are beginning to learn the "why" as explained here. the boiled-down answer is; Because humans live and respond within larger natural cycles, and their participation in financial markets reflect these cycles.
Rates are not only low, but they have been in an unbroken dropping trend since their highs in the teens of the late 1970's and early 1980's. A trend is defined by its trailing extremes, and interest rates have had their high-extremes at, or lower, than their previous high-extremes since those 70's/80's times.
how can we determine whether their recent upward movement is just typical of the 1/3 of the time where you say rates spend vacillating, or the start of a sustained upward trend typical of the 2/3 of the time where you claim rates exhibit trend behavior?
This is an outstanding question. I always start from the highest-level perspective known or findable (in this case, 200 years of pricing on 30 year terms,) and then gradually shift to slightly more granular time perspectives.
If it's the first, then we're just seeing an upward tic that won't impact rates next year. If it's the latter, then we can expect mortgage rates to be higher next year. So which is it?
The ONLY way we'll have a market confirmation of reversal of trend is when there is a new extreme established (a new high, in this case,) that is further than its previous high, considered from the perspective of the timeframe viewed.
If I were more savvy in HTM, I could post & insert the timeframe charts here for you, with circles and arrows and trendlines illustrated to help the understanding... but I apologize; I hope I am being more helpful than confusing, but I don't have the time to clean this up & make it graphically pretty.
Hope that's helpful.
Sorry... I understand the "stop" cry, but not clear as to why... and have no idea what language "MEGO" is (which is no doubt the clue offered...)
(PS. I thought FF and I've been getting along well... a pretty content-rich thread here, IMO... no?)
I know none of you have a crystal ball, but could those of you in the mortgage or related fields offer some insight into how you believe things will go over the next 90 days? We are building, will be needing to make some decisions about locking in our permanent rate soon. I'm one of those who has been neurotically checking the rates every day (yes, EVERY day), and have been alarmed at what seems the modest but steady creep up of rates over the last week or two.
Short-to-mid range prognosis is the toughest...
VERY short is easier.... mid-to-long range is easier.
If it were MY money, currently I would only lock if I were closing in the next 3-4 weeks. If I had longer than 60 days, I would likely let it float, since the last week or so has seen a fairly dramatic pull back from an otherwise steady and stable trend. Established trends tend to draw diverging tangents back to the mean.
BUT... you're unlikely to actually see more than 1/4%-ish difference either way from here... so measure how much your mental sanity is worth, relative to your desire for that potential rate improvement.
Locks longer than 45 days tend to be rather expensive as well... just to add to the considerations.
This post probably isn't all that helpful... LOL... sorry.
Actually, Dave, it was extremely helpful - especially the 1/4%-ish difference comment. A quarter-point for the money we are borrowing is not a budget-crippling amount, so that does provide some comfort. My fear has been some staggering rapid increase right before we need to convert.
Thanks for your thoughts - you're always very helpful.
"Leverage Planner, formerly Mortgage Guy, former-formerly Hedge Fund Guy"
And soon Inflation Management Expert - once the inevitable runaway devaluation of the $$ picks up steam! (because with energy prices everything else will become much more expensive eventually)
And soon Inflation Management Expert
Heh... have you been reading my posts on another 'real estate investment' board?
Spooky if not...
Dave - As always you have great insight to add to these forums.
I also want to add that you have the patience of a saint. Seriously, no matter how much someone may try to bait you into losing it - you're alway cool as a cucumber and polite. Very impressive - a skill I hope to emulate.
Please! My Eyes Glaze Over! -- which is possibly the intention.
Back to the topic. It seems to me that the Fed is going to stick firm with its rate, finally recognizing its cuts (and unwarranted aid to Wall Street) have NOT HELPED and INFLATION IS HURTING.
Bye. I'm off to take out a mortgage on buying some hens and a cow.
Thank YOU for the appreciative comments!
Please explain.... your comments are puzzling in & of themselves...
Why would someone openly seem to complain about, and acknowledge that they aren't understanding, a thread they aren't understanding? (If I am even understanding what you are saying by "my eyes are glazing over.")
I don't have you 'identified' as someone who would wantonly complain or snark about something that would bejudge against yourself... so, I am really expecting that I am completely misunderstanding the declarations...
Perhaps the comments are a fending off of an anticipated antagonism between FF and me? (We've actually been getting along well, IMO... and FF's been very willing to stop & think about the issues at hand before attacking, for the most part...)
I'll acknowledge that not everyone loves the study and undertanding of the human markets as much as I do... and that even perhaps some might be bored with how money works... *BUT*... isn't that a major part of what this particular board is all about?
In 2004 I moved and was in the housing market for the first time in 13 years. Lots had changed and I looked at my realtor and said - this is crazy, it can't last. An older middle aged woman and very experienced realtor she assured me it would be fine, the same as all the experts were saying right up to and into this mess.
Now I'm not saying anyone can predict exactly what the actual mortgage rates will be when, and they will go up and down (while on the way up) but anyone who isn't worried about a repeat of the 70s and 80s rates hikes where rates were 14 and 17% is one of those "experts" who were saying the real estate market was fine as far back as a couple of years ago. The "it can't happen because of blah blah blah" is just that - blah blah blah no matter how expert it sounds or even is. Just because it doesn't happen next month (our sense of time and planning is so off) doesn't mean it won't happen.
9/11 and the war have cost so much more than we realize. Its all been deferred. (I think we'd all keel over if they could give is real numbers)
The jobs thing will hit harder eventually (thanks to the same experts who blah blahed about jobs going offshore)
Look around and use a little common sense. Jobs, wages, bills. It applies to the economy at large.
I feel sorry for whoever wins the election frankly. Its going to get ugly economically, there just isn't any way around it.
The below article may not much in the short term. But I think rates going up is a long term trend.
Here is a link that might be useful: Mortgage rates 3 months
Oh jeez, I really didn't want to post on this thread, but I have to address your accusation of baiting.
I would never "bait" anyone who clearly speaks with greater knowledge than mine within his area of expertise, as we see Dave do on this thread in his exchange with t-mac-mo And he has helped many other people on here when they have asked specific factual questions about getting mortgages or the wisdom of refinancing. And he shows much patience in handling their questions.
More problematic, in my opinion, is when he preaches, as he often does, his gospel of heavily leveraging your house mortgage as a way of getting money to make other financial investments. We should all realize, I hope, that much of his own financial well-being depends in large part on persuading other people to do just that so one has to wonder whether he should be regarded as an unbiased source when he ventures into financial planning advice. The fact that he sincerely believes what he advocates (I'm quite sure that he does) doesn't alter anything.
But it's his statements like ""statistically speaking; once a trend has been established any 'correction' TENDS to revert back to the established trend (statistically around 2/3 of the time... and the other 1/3 is naturally what any exceptionists will point to.)" that I find most fascinating. I certainly don't know what that's supposed to mean (do you?) and what I was trying to find out (not very successfully, I'm afraid) is whether he does either.
I do appreciate that our exchange was off topic and I apologize for that. It's easy to get suckered into these things and hard to stop when you're having fun.
Wow... talk about obfuscation!
I would never "bait" anyone who clearly speaks with greater knowledge than mine within his area of expertise
How do you define "never"?
More problematic, in my opinion, is when he preaches, as he often does, his gospel of heavily leveraging your house mortgage as a way of getting money to make other financial investments.
"Preaching"? "Gospel"? "Heavily"?
A) How do you specifically define "heavily"
B) Where (links) have I *EVER* encouraged anything LESS than balanced responsibility?
We should all realize, I hope, that much of his own financial well-being depends in large part on persuading other people to do just that so one has to wonder whether he should be regarded as an unbiased source when he ventures into financial planning advice.
That's defamatory, and precisely the low-road "baiting" that was referenced.
The fact that he sincerely believes what he advocates (I'm quite sure that he does) doesn't alter anything.
Facts aren't alterable, fortunately.
I certainly don't know what that's supposed to mean (do you?) and what I was trying to find out (not very successfully, I'm afraid) is whether he does either.
So you can acknowledge yoou don't yet understand the financials I just explained.... yet you are trying to discern if *I* understand what I am explaining (that you do not understand)?
Are we all seeing the irony?
I do appreciate that our exchange was off topic and I apologize for that.
Actually, I think you've been ON topic... the topic being 'hearing that mortgage rates are going up," and whether there was any surprise that the OP had been told such things.
It's easy to get suckered into these things and hard to stop when you're having fun.
We do love our fun together, don't we?
Dave, I think Chisue said "My Eyes Glaze Over!" because you'd asked what MEGO means. It would appear to be the initials of that impassioned cry.
Yes, the acronym made sense after the expanation. That was why I inquired a few posts later why she would make what appeared to be a rather odd exclamation (all things considered, and given the thread itself, as well as the topical nature of this particular community.)
Saying "Stop" and pointing at FF and me because of a discomfort with adversarial nonsense... that seems like a reasonable thing.
Having "glazed over eyes" implies either boredom (which certainly can't be discounted, but which would suggest a 'moving on' as the better plan,) or a failure to comprehend a detailed issue (which we've all been faced with at times... certainly I have.... but I wouldn't tend to advertise the fact when it occurs.)
Perhaps there's yet a third implication... but we haven't heard of it yet.