This seems to be the question of the week, but no one really appears to have an answer. Until now: the spike in interest rate has been caused by a jump in the 10-year Treasury note, which is the leading barometer for interest rates and various other loans.
There are several factors that have caused this jump in yields on the 10 year note, the largest being the ever increasing United States deficit. The recovery plan that the U.S. has put together comes with a hefty price tag. We are now starting to see stabilization in various sectors, but this progress comes with a downside. There is an increasing fear that other countries will pull out of the international debt market, moreover, a full out refusal to buy U.S. Mortgages Backed Securities (MBS). Although we are a world power in more ways than one, we still rely heavily on foreign counties to buy our debt. With the government spending money almost as fast it can print it, the fear of inflation is once again becoming the dark cloud that is lingering off in the distance waiting to roll in.
What does this mean for the recovery of the US Economy? For most families, mortgage payments make up their largest monthly expense. With increasing mortgage rates, American families will be spending more on their house payments and have less of their income to put back into the economy, thus impeding a speedy recovery. Fortunately, the Government is taking a pro-active stance to expedite an economic recovery, so we can look forward to further regulation changes to help homeowners.
What does this mean for the average home owner? Low rates are not going to be around forever! In fact, the low interest rates we are experiencing today are due to the unprecedented actions taken by our government. Don’t lose your opportunity to take advantage of this historic event.
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