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Mortgage Rates Up..Why?

2K views 14 replies 10 participants last post by  Tittyman 
#1 ·
Over the last couple days I noticed mortgage rates have gone up about .50%..why is that.
 
#5 ·
The real reason is randomness......

The market is volatile, more so now than in the past. There are two main choices for investments - stocks (we know how that's been going), and bonds, also known as mortgage backed securities. If you take your money out of stocks, you generally put them in bonds, and vice versa, but in bonds, you pick the price (rate) that you are willing to buy at. Just because the Fed makes regulation changes that "should" alter the interest rates,(they don't change the actual rates, they make cash easier or harder for banks to loan by changing the reserve amounts, etc.) the actual investors are the ones who set the rates that you see when you get a loan. If the investors don't want to invest at a lower rate, then there will be no loans at the lower rate. The rate becomes what the investors will be willing to invest at....

Probably clear as mud, I know it was for me when I was learning the banking end of stocks and bonds....
 
#6 ·
Respectfully disagree about randomness. The government is the only game in town regarding debt. Cost of capital is up and expected return requirements have gone up with them. So in order for Freddie or Fannie to securitize their debt, they need to make it enticing to potential bond holders, thus increases in spreads. Also, a 26 bps increase to the underlying security (the 30 Yr T) from Oct 1 to Oct 16, means that you will have to pay at least that increase before even considering the increase to spreads.
 
#8 ·
"Randomness" ties closely with chaos theory and the law of unexpected consequences - Individuals make the investment decisions, and there are so many variables (in mathematical terms) that there is no way anyone could know the specific outcome of any specific action on the economy. Therefore, the end result is actually random, as in not predictable, at the level of observation that we as humans can perceive. You may be correct that randomness is not correct, but we lack the capability of comprehending, even with computer aids, the entirety of the complexity of the variables.

Economists must be able to do multi-variable calculus in their heads just to get the bachelor's degree, but that doesn't mean that the actual outcomes can be predicted; there are simply too many variables for anyone to wrap their heads around.

Probably made it worse....:)sphss
 
#9 ·
Rate Hike

You think this rate increase is short term or can we expect more increases for a longer period of time..if they increase where do you think the top is and when would you expect a decline..
 
#14 ·
I would say, hold on and lock those loans in....After the election, whomever wins, the interest rates will have to be raised to strengthen the dollar. I don't see it shooting up fast but I assume it'll be a slow rise.
 
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