What an exciting week it has been! The mortgage rates have really been volatile and we are seeing a very crucial support level being battered. Mortgage rates are currently at 2.5 year lows but may see a huge reversal very soon. This week we have went from an average 30 year fixed mortgage rate of 5.875% to an average of 6.375%. This is a drastic move to say the least. The concerning part is the fact that we may see interest rates in the high 6% range very soon.

Inflation Monster

Oil prices continue to weigh on the consumer along with surging food prices. Should this trend continue we will see interest rates spike north very quickly as inflation is the number one enemy of mortgage back securities. (Mortgage backed securities are the foundation for interest rates, not the Prime rate as many think.) Inflationary pressures will most undoubtedly continue for the short term as concerns over supply and rising demand in China and India will continue to push the cost of most all goods higher. Consumers could get hit with a double whammy as the cost of goods are increasing and the ability to acquire moderately priced loans will become more difficult.

Move Swiftly

The best advice now is to act in a timely manner. SImply put, if you see a home that is a great deal and you like the monthly payments, pull the trigger! Waiting around for the bottom barrel price on a home could quickly become a huge problem if interest rates break the 7% barrier. A change from 6.375% to 7% would equal a 10% change in your monthly payment!

I will keep everyone posted on these fast and exciting times but lets all hope that inflation begins to ease not only for gas prices but for the health of the housing market.