Interest Rates (Part 2)

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Of Further Interest (On Interest Rates)

In follow up to our article Time to Take Interest in Interest Rates, which contained valuable information on interest rates and quotes from the Feds and CNN Money, we’re going deeper. This month, we’re taking a look back in time and into the future.

In July, our local source and lender, Dave Rusk at Idaho Central Credit Union (ICCU), told us we would be right where we are – around 4.5%.

“My guess would be [rates] stay around the 4.5 area for the rest of the year,” Rusk estimated, adding that the super low days are behind us. “Rates are not going back to 3.3 or 3.5%.” He also said we’d not experience any other major changes for the year, aside from that percentage point jump we experienced in Spring. Kudos Dave, you we’re spot on!

As reported last month, Frank Nothaft told CNN Money he expected rates “to hit about 5% by mid-2014.”

The Wide Angle

Expert and technical analyst Louise Yamada points out that the current generation hasn’t yet lived through an era of climbing interest rates, as the last one ended in the early 80s. She made quite the chart, looking at interest rate trends over 200+ years, dating as far back to the days of George Washington’s lifetime.

Technical Analyst Louise Yamada’s 200-year interest chart. Source: Yahoo! Finance.

Brave enough to make predictions

Yamada predicts, and depicts, that we will see the start of higher interest rates trends that will last for the next couple of decades. “Our 32-year declining market for bonds appears to be coming to an end, based on historical indicators of rising rate cycles and reversals,” she told the Yahoo Finance team.

Zillow chief economist Stan Humphries told the Boston Business Journal, “Interest rates will rise to 4.5 percent by the end of 2015 and they will be at 5 to 5.5 percent by mid 2016. By then, we expect the economy to be doing much better and we will be trying to soak up liquidity… We will see inflation rise, pushing mortgage interest rates up.”

The National Association of Realtors also predicts increasing interest rates. Source: Ada County Association of Realtors



Housing market reactions

In terms of home prices, interest will affect what a buyer can afford, what an investor is willing to pay and the overall supply, demand and capital flow of the marketplace.

Interest could hold housing prices down, some say. Buyers may be prompted to buy lower-priced homes or make larger down payments, to achieve lower monthly payments.


What’s it mean for us?

If the first step is getting pre-approved to buy a home, and the second is finding one, then the third is locking in your interest rate. This doesn’t change, despite the upward shift in the trending direction of interest rates.

Dave Rusk will look at the most recent couple of weeks when advising clients on a good time to lock in a rate. It’s hard to predict. On a day-by day bases, the change could be 1/8th of a percent. He watches the ten-year yield, available on any financial site, to monitor the changes and help buyers secure the best rate.

As much as I’ve enjoyed sifting through them, I’m not making any predictions, other than more good home-buying and -selling experiences for my clients. Call me if you’d like to share one.

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One Response to “Interest Rates (Part 2)”

  1. Foster Boise Local Real Estate Blog » Blog Archive » Current Boise Housing Market Trends Update. Says:

    [...] the inevitability of increasing interest rates has been examined in our previous blog posts, Dave Rusk of Idaho Central Credit Union reminded us that these things happen slowly. On a [...]

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