Last week I learned the Fed is going to reduce it’s holding by around $1.4 trillion. That is a huge amount of money that won’t be be going into U.S. Treasury bonds and mortgage-backed securities.
The Fed has nearly $4.5 trillion on it’s balance sheet now, the Fed only had about $800 billion in assets before the mortgage crisis ten years ago. Looking at the above chart, they did what they wanted to do which was lower interest rates to help the economy recover. Now that they are backing off of their investments, it makes sense that interest rates should be going up soon.
Of course, everything is a guess. On Oct 19, 1981, a 30-year mortgage was 18.44%.
This is why we keep saying, “The interest is the deal.”
In the end, we can afford payments, not interest rates.
If you can afford $1,415 a month mortgage, that translates to a $315,000 home on a 3.5% loan. If the rate is 5.5%, you could only get a loan for $249,000.
We had a lot of people buying last year when interest rates bumped after the election. If interest rates jump as much as we are hearing, there will a be a lot of buyers and sellers wishing they had made their decision sooner.
Want us to connect you with a great lender? Call Jaimy at 503-502-3330