Wednesday, August 22, 2012

When will mortgage interest rates go up?

This is the question of the day...

To make a prediction you must first understand our current economic situation,
then look to what makes mortgages fluctuate and why.

United States has been printing money
Printing US $ = US $ value decreases

Commodities (wheat, cotton, lumber, oil) are traded in US $
US $ Value decreased = Price for commodities increases

When the cost of purchasing commodities increases people have less to spend, therefore slowing our economy
Spending decreases = Government decreases rates
to stimulate spending

Why are
rates so
Right now everyone thinks the sky is falling because of negative messages in the media.
Fear in market place = People looking for safe investments (bonds)
The more people buying bonds drives the bond yields down
$ Out of stock markets > $ Safe bond investments >
Bond yields decrease and mortgage rates decrease

** Important note: Fixed mortgage rates follow bond yields **

When will

When people start to realize the amazing opportunity in our market
S & P 500 returned 3.71% over last 10 years in total

Based on the average house price in Canada, over the same
10 year period; real estate went up 232%

House prices are low, and people are starting to see the value in investing in a tangible asset (real estate)
$ Out of bond market > $ Into real estate > Bond yields increase and mortgage rates increase

No comments: