Rising Mortgage Rates: Key Indicators for Homebuyers to Watch

You’ve heard the old saying by Isaac Newton, “What goes up must come down.” Well, the opposite is also true, especially for home mortgage rates…what goes down must come up. We’ve been enjoying rates at record lows for years, but now we’re starting to see an uptick. What’s prompting them to rise? Here are some key indicators to watch:

Treasury yields

Better than a crystal ball, 10-year treasury yields are an excellent indicator of how mortgage rates may increase and decrease. Why? Because both are highly influenced by investor activity in the bond market. Bond yields have risen steadily since August and then jumped higher in the new year. That swift uptick was due to a renewed optimism in a rebounding economy. It stemmed from two things 1) the government’s stimulus payments 2) the COVID-19 vaccines finally being distributed throughout the U.S.

Mortgage lender’s profits

It’s no surprise that with the record low rates, mortgage lenders are flush with profits. Keep your eyes peeled for news about lenders. Even if mortgage rates rise further, lenders will likely absorb some of that increase to keep a steady flow of business coming in…at least for a little while. For them, it’s worth it, even if they have to dip into some of their profits to keep that momentum going. However, that approach is not sustainable, so be prepared to move quickly if you plan to refinance or purchase a home soon.

Federal Reserve purchases

Keep an eye out for when the Federal Reserve purchases mortgage-backed securities. This past year it bought millions worth of them. Granted, doing so helped stabilize our pandemic-rattled economy. The Fed purchasing those home loans helped maintain liquidity in the market during a time of crisis. 

Labor markets and COVID-19

Future mortgage rates have much to do with how well we handle the COVID-19 pandemic moving forward. Success on that initiative will also help improve labor markets. Without progress on both, there may be a limit to how much higher the mortgage rates could rise. Up, down, good, bad, these are facts that push rates higher and lower. 

Here’s the good news…

While the evidence shows that mortgage rates will continue to rise, it’ll be a long while before they hit record highs. Curious as to what that record high was? According to Freddie Mac, it was a whopping 18.63% in October of 1981. Conversely, the record low occurred this past December. It was an astounding 2.66%. As of this article’s writing, they’ve risen to 2.9%, which is still an incredibly low rate. 

The bottom line is that it’s not too late. If you’re in the market to buy a home, you may want to lock in your mortgage rate now. Why wait? The rates continue to be historically low, so take advantage now before they continue to steadily rise over the coming months. We’re happy to help you find both your perfect home and the perfect loan. Take a look at the current listings in our award-winning Southern Living-Inspired Community and contact us today to learn more.