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What's Going On With Interest Rates

Thirty-year fixed interest rate loans are nearing an industry average of 5.0% this month, up 1.5% since January. I wrote a blog the first of the year saying an excellent barometer of mortgage rates, the 10-year treasury, then still sub 1.60%, was an indicator that mortgage interest rates would remain low (that rate today is 2.78%). What I did know was the December consumer price index was going to increase the most in 40 years. That reality forced a quiet Federal Reserve to become very active in trying to rein in inflation. The Fed made a ¼% hike in the prime interest rate in March and is now discussing ½% hikes multiple times this year in their effort to slow inflation down. Such actions raise the cost of borrowing money throughout the economy. Forty years ago, mortgage interest rates bloated to over 18%. Hopefully we have learned how to control our economy better than resorting to such drastic swings. Taking a historical perspective, a 5% mortgage is an excellent rate and another reality to consider, typical mortgage rates prior to the early 80’s spike were over 8%. It took 20 years from those wild rates of the 80’s to return to a rate of 6%. Five still looks like a great mortgage rate to take advantage of using for your real estate hunt.

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