Safe Haven Trade to Unwind

Mortgage rates had a nice run from February through most of March. Much of the improvement with rates was due to major disasters in New Zealand and Japan along with the unrest in the middle east. Geopolitical concerns and unrest drive investors to the bond market as a 'safe' place to put their money when there are times of uncertainty. This played out nice for mortgage rates as the increase in the demand for mortgage bonds drove down rates. Though the situation in Libya and mess in Japan are still front page news events their immediate threat has passed a bit and mortgage rates are starting to trend higher. Along with the average investor starting to pull out of bonds the Treasury department has began to unwind their holdings of mortgage bonds and the Federal Reserves QE2 program ends in June. All these events along with the 1.6 TRILLION dollar budget deficit will need to be funded with new bonds being issued in the market place. 1,600,000,000.00 LOTS OF ZEROS!! That's a lot of supply that will hit the markets which will likely push rates higher through the next year. I have tried to stress to my clients that rates have been extremely low the past four years...and that typically rates are around 7%-8%. When...and I did mean to use the word 'when'... rates go up many will have a harder time affording homes due to the higher payments that will come along with those higher rates. We are living in a very unique time. With these low rates and the drop in prices buyers have a great opportunity to jump into home ownership with rates they will be able to brag about for decades to come. If you need a home loan...now is the time to lock it in!