In only 2 weeks time, we have seen the conventional 30 year mortgage rates jump from 3.625% to 4.00%. This substantial leap is the largest of its kind in two years. Ensuring these rates, in this elusive of a market, can financially hurt lenders.
This large increase doesn’t seem to be the last either. So far this year we have seen a continual growth week-by-week. Fingers can be pointed at two main issues: the predictions of a federal rate hike and the sluggish market in Europe.
Yes, we’re talking about Europe. How and why would Europe come in to play with this? It’s simple when you break it down. They have had a large impact on our rates for the past 5 years since the beginning of the financial downfall of Greece. 5 years should be enough time to handle the situation with Greece, but with that issue still lurking in the darkness, the overall state of the European economy, and a new quantitative easing program in effect, there’s a lot that can alter our market.
Rates fell around the world in 2014, especially in Europe, which led markets to believe a federal-style quantitative easing program would be put into place within the European Central Bank. When the program was initiated, rates continued to fall and markets were under-prepared. Rates seemed to have reached the market floor in April, so onlookers are speculating if this will be the big bounce.
If this is the big bounce, then we could be in trouble. A domino effect could take place, assisted by the mortgage-backed securities. We can only wait this one out and see how it all will conclude.