Uncertainty Jolts Rate Increases
Mortgage interest rates rose in March after the new Federal Reserve Chairwoman Janet Yellen gave her first press conference. In her statement, Yellen implied that the federal funds rate may increase several months earlier than originally anticipated by market watchers.
Mortgage interest rates moved upwards of a quarter point higher in rate. The “best execution” went from around 4.25 percent to around 4.5 percent for 30-year fixed conforming money. Rates went up dramatically in the course of around 24 hours.
There will be a lot of examination and interpretation of the Fed’s comments in coming weeks. Some Fed watchers seem to think that the markets reactions may be a little extreme.
Everyone knows that eventually the Fed will be raising rates. The larger question is: when? At the same time, the overall economy is growing but not by robust numbers. Another factor is the continued instability, generated by foreign events, which fosters some insecurity in the markets. Traditionally, uncertainty is good for the bond markets, which in turn are good for mortgage interest rates.
On another front, policy makers are studying possible changes to the mortgage tax deduction. The current study shows that wealthier homeowners benefit more than average homeowners. Some of the proposals would have income limits for those who want to qualify for the mortgage deduction. Considering that many members of Congress own a couple of homes and understand the clout of the real estate industry, we will have the makings of some interesting discussion of this issue in the future.
As this column is being read, most readers will be getting ready to file their 2013 taxes. Make sure that you have your account review of your last mortgage settlement sheet. This is especially true if you have refinanced or purchased a home in the last tax year. Nobody wants to leave money on the table when it comes to taxes.
It will be a volatile time in the mortgage rates for the near term. Take advantage of any dips in rates and lock in. Listen to your mortgage professional during these times of volatility.
Bill Starrels lives in Georgetown. He is a mortgage loan officer who specializes in refinance and purchase mortgages. He can be reached at 703-625-7355, or email firstname.lastname@example.org (NMLS#485021).