MARKET WATCH – January 14, 2022
Mortgage rates are rising. Owner and Managing Broker Nathan Beauchamp shares a market update on interest rates and helpful context for decision-making. Learn how this affects home buyers and homeowners who are considering a refinance or debt consolidation.
Market Changes in the Last 90 Days
Nathan Beauchamp: I’m Nathan Beauchamp, the owner and managing broker of Nathan Mortgage in Lakewood, Colorado. And today, I want to tell you a little bit about mortgage rates. If you’ve been paying attention to the news, you probably already know that rates are up, and I kind of wanna show you what has happened over the last 90 days and then over the last 30 days as well.
Nathan Beauchamp: So we’re gonna get a little nerdy here. I’m gonna show you charts and graphs. Bear with me. This is the most recent 90 days of mortgage rates for a 30-year conventional or conforming loan. And you can see back around November 9th, the lowest average issue rate was about three and one eighths. And then we’ve kind of been tracking this 3.3% range for, you know, a solid month and a half. And then, right after Christmas, we see rates skyrocket. And a couple of days ago, the average 30-year conforming rate, meaning the rate at which loans closed as reported by title companies, was at almost 3.7%. If we look out over the last 30 days, you can kind of see this climb and then a little bit of retracing, meaning rates have trended back down a smidge.
Inflation and Home Loan Interest Rates
Nathan Beauchamp: So why is this happening? Well, there are a couple of reasons, but probably the biggest one. And again, if you’ve been paying attention to the news, you probably have seen this as well. Is that the consumer price index, which is the U.S. government’s method of tracking inflation, we have kind of hit a 30-year high point.
Nathan Beauchamp: So this is the CPI or consumer price index that kind of tracks all of the items you see in this list. And the average rate of inflation, according to the U.S. government, is now 7% from last December to this December. That’s a pretty insane inflation rate and what you also have to keep in mind. Is that the U.S. government treasuries, which is the way that the U.S. government will lend out money to hedge funds, banks, consumers, and mortgage lenders is kind of based on some of this.
Nathan Beauchamp: And it’s in the U.S. government’s interest to show inflation to be lower than it actually is. So, I don’t know what the true rate of inflation is. We can’t know it at the moment, but I would strongly suggest that it is higher than 7% personally. I think we’re up into the double digits based on everything that I have seen.
Nathan Beauchamp: What does that mean? It means that the fed. Which is the way that the U.S. government regulates the rate at which banks can borrow money. They’re going to start increasing that index rate, and they increase it in quarter-point intervals. Highly likely they’re gonna increase it three to five times this year.
Nathan Beauchamp: So there’s a pretty good chance that by the end of 2022, rates are gonna be north of 4%. That sounds terrible because we’ve been in this rate trench for, you know, well, over two years where you could get a 2% 30-year fixed. Many of you, my clients, already have that, but to take a little bit of the fear away, let’s kind of look at all years.
Historical Home Loan Interest Rates
Nathan Beauchamp: So this is the 30-year fixed rate from when this particular index started tracking it back in January of 2015 through today. And you can see 4% is a pretty average rate. And in fact, if we go back to kind of November two years ago, three years ago, four years ago were in the fives.
Nathan Beauchamp: So. Going to three and a half is not the end of the world. Going to four isn’t the end of the world. It’s actually an indication of a thriving economy. It’s an indication that we need to do some things to curtail the inflation caused by all the fed pumping in response to COVID.
Recommendation for Home Buyers
Nathan Beauchamp: If you are a home buyer, it behooves you to get a rate lock-in as early as possible because this trend is gonna continue up. All of the metrics say it will. We will have little intra-day days where there’s a slight drop in price, but on the whole, we are in a rising rate environment. And that is where we are gonna stay. So if you are a home buyer, the second you can get under contract, we want to be locking your rate.
Refinances and Debt Consolidation
Nathan Beauchamp: If you’re in the market for a refinance, kind of the ship has sailed on those 2% rates. But if you were in the 4% range, there’s still a lot that can be done. If you’re thinking about debt consolidation, still a lot that can be done. So the story of 2022, in my mind, is gonna be inflation. How do banks respond to it? How does the fed respond to it? What does that mean for consumers? And you’re gonna get updates from me every time there is something worth talking about. If this spurred something for you and you have questions about your individual scenario, please reach out. Would love to connect and would love to consult.
Watch Next: MARKET WATCH – July 4, 2022