I heard a joke that said, “We can pay off our past and save for the future, as long as we avoid the present.”
There possibly couldn’t be a more true statement. We are a credit-dependent culture. We work our entire lives with expectations being drilled into our heads that we need formal education, or in order to purchase a home, car or attend college, you’ll need to borrow money,
Then you might get stuck wondering where all of this money you need come from? Loans; yes loans are available for all of your needs.
Our need is for a lending institution to take a risk on you, and in turn, they take a risk on the economy as a whole. How and when are all of the terms and percentages decided?
Let’s focus on mortgage interest rates. Today, mortgage rates are at or below 4%, the lowest level in many decades. How are the mortgage interest rates determined? Mortgage interest rates are determined mostly on the secondary market; the Federal Reserve’s Open Market Committee meets about every six weeks to set interest rate policy. They do this by adjusting the fed funds rate and by adding or draining money from the banking system by buying or selling Treasury debt on the open market. The Federal Reserves main focus is to navigate between raising rates (inflation) and keeping the economy moving along (by lowering them.)
There are many economic and political factors that affect mortgage interest rates:
The state of the economy
Investors’ demand for safe assets
These are just a few. Interest rates, similarly to the econonmy go up and down. There is no way to be certain of when it will change or by how much. Of course, there are predictions, but predictions are educated guesses.
Early on, the 2016 predictions said we’d see a rise in interest rates, but then several events took place, the surprising Brexit vote, and the tumultuous presidential election cycle. No one could foresee these events.
Homebuyers need to stay educated and be smart, save for a down payment, make sure your budget can handle a monthly mortgage payment, and evaluate the entire picture to determine whether now is the right time for you to buy.
The Certo Team 55 N. Arizona Place Suite #103 Chandler, AZ 85225 602-429-6789
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