A recently published survey by Freddie Mac shows that 30-year fixed rate mortgage interest rates increased to 3.94% this past week. Recently rates have been around 3.5% since early summer, leaving many inquiring about why the rates increased so significantly.
Why did rates increase?
Presidential elections always lead to uncertainty in markets. This is usually seen initially through the way investors react. As we've seen since election night, when the market tumbled initially, and throughout election night as they rebounded to record highs. Many investors pull their money from volatile traditional stock market and move it into bonds.
As this happens, the rates on Bonds don't have to be as good to provoke investors into purchasing them, so the rates go down. As the election draws to an end, investors shift back to the stock market, causing the Treasury to hike rates on bonds to make them more appealing again.
Easily put, the stronger the economy, the higher the rates will rise. Of course nothing is that easy, and there are many variable as to why rates go up and down. For full explanation, check out some investment websites to get a better grasp on interest rates.
A recently published survey by Freddie Mac shows that 30-year fixed rate mortgage interest rates increased to 3.94% this past week. Recently rates have been around 3.5% since early summer, leaving many inquiring about why the rates increased so significantly.
Why did rates increase?
Presidential elections always lead to uncertainty in markets. This is usually seen initially through the way investors react. As we've seen since election night, when the market tumbled initially, and throughout election night as they rebounded to record highs. Many investors pull their money from volatile traditional stock market and move it into bonds.
When this happens, the interest rate on Treasury Bonds does not have to be as high to entice investors to buy them, so interest rates go down. Once the elections are over and a President has been elected, investors return to the stock market and other investments, leaving the Treasury to raise rates to make bonds more attractive again.
The Good News
All though interest rates are much closer to 4% than they have been in the last 6 months, they are still a little lower than they were at the beginning of 2016 when rates where 3.97%
The even better news is that at 4% rates are still historically lower than they have been in the last 40 years, note the chart below.
