Mortgage Rates, The Election and The New Year

Without getting too political I think it’s safe to say that was one of the craziest campaign seasons and elections our country has ever seen. It also ended with probably one of the biggest upsets ever and the markets weren’t sure how to take the news. On the night of the election, when it was decided that Trump was going to win, the Dow futures dropped over 800 points; however, when trading began the next day, the market not only recovered but it closed the day up 257 points. The S&P had the largest bounce back since the 2008 banking crisis, which wrote new records. While the Dow and the S&P got the major headlines, the Bond Market was also on the move and mortgage rates are tied closely to the Bond Market.
The 10 year treasury is an index that trends comparably to mortgage rates (not a direct correlation but they move similarly). The 10 year treasury hit a historic low of 1.37 right around the time we saw the lowest mortgage rates in decades. By Nov 7th the index had crept up to about 1.78. In the days and weeks following the election the index continued to rise and on December 1st the intraday trading flirted with 2.5. It capped out at 2.49, which is a 2 year high. While this sounds extreme and maybe a little scary, historic graphs will show you that rates are still low in comparison. For example, in December 2013 the market closed at 3.01, in 2007 we were at 5.03, and in fact prior to 1998 the index never fell below 5.0.
Rates are clearly rising and there’s no denying it. Some mortgage products have seen rates rise as must as half a point in the last month. For years now the mortgage industry has been predicting that interest rates will rise. In spite of this, we’ve been seeing incredibly low rates in the 2’s on the 15 year mortgage. These exceptionally low rates however, are not normal and it couldn’t last forever. Historically speaking, our current market is still quoting great rates! We all need to learn to accept that interest rates in the 4’s are still REALLY good. It may not sound as good as 3.75%, but this is likely the new norm.
I don’t have a crystal ball and I can’t say what will happen with rates in the New Year. The new administration has many changes planned, so my advice would be to not obsess over it. If you are interested in buying a home because the timing is right for you and your family, then just do it! If you have a higher rate mortgage or are paying mortgage insurance and a refinance makes sense, go ahead and refi! Just have an expectation that rates might be a little higher than what your colleagues locked in at a few months back. The good news is if you’re reading this, chances are you qualify for a Doctor Mortgage if you’re reading this on www.doctorloanprograms.com so you have a lot of options and no mortgage insurance.