As a seasoned loan originator, I tend to get a few questions asked of me repeatedly. Besides, "Do you think the housing market has hit a bottom?" I think the question brought up most is, "What do you think interest rates are going to do?" First, let me start by saying that no one really knows for sure what is going to happen to rates. However, if you watch the market closely, you can at least try to figure it out and be a little ahead of the curve when making a decision as to refinance, lock a loan in, etc. Here are a few things you can watch to get a good idea of what rates are doing and the direction they may be heading.
The yield on the 10-year treasury note is one of the largest market indicators showing the direction rates are heading. Click Here to see the 10 Year Treasury Note Yield Although, not directly tied the bond market, if the bond-yields are heading up, rates will more than likely follow. Another good link is the FannieMae coupon: http://www.bloomberg.com/quote/MTGEFNCL:IND Rates are almost directly tied to this however, watching doesn't give you lot of time to react to a change because they usually have already been affected if a major rise or fall takes place in the coupon.
So, the next question is, what will make the treasure note yields change? Please realize that the yield is another way of saying what interest rate you will get by purchasing a government bond. When the economy is doing well, bond yields generally rise. People pull their money out of bonds and put them in stocks, or into their businesses which makes the government raise the yields to get people to invest back into bonds. Currently, the European debt crisis is having a significant impact on mortgage rates. As their news worsens, investors are more likely to buy US Treasuries instead of their European counterparts. Why? Because they feel the US is less likely to default on the debt which means less risk in US bonds.
One thing I often check is the weekly economic calendar.
Click here to see the economic calendar For example, if unemployment numbers are coming out on Friday and you expect a big drop in unemployment for whatever reason. It might be good enough news that people will pull their money out of bonds, put it in the stock market, and therefore, cause the yield to rise and more than likely make rates rise as well.
So, this just scratches the surface of all the various indicators of what rates may or may not do. In no way should you use this data to base any sort of financial decision on. It is simply meant for educational purposes only. If you have any questions, or would like to know more, feel free to contact me at 1-866-777-1865.
