At the SMDRA Statistics Committee we talked last week about mortgage rate trends during each of the last several years. So, I reviewed the average monthly mortgage rates for the last 9 years since the Fed introduced their Zero Interest Rate Policy and I noticed rates peaked in the first quarter 5 times.
However, I do believe this year is different as our economy is really starting to grow as witnessed to by over 300k jobs created in February and the Household Survey showed over 800k new jobs. Plus, consumer, small business, and builder confidence are all at their highest levels in over a decade. Thus, should see GDP growth of 3% or more this year which has always caused interest rates to rise.
Plus, the Fed is now doing Quantitative Tightening in which they are re-purchasing fewer and fewer bonds this year and increasing their tightening in April, July, and October. Finally, at the same time the Treasury is issuing more new debt creating more supply. So, the Treasury is creating more supply and the Fed is lessening their demand, thus increasing the supply of bonds available to other purchasers. To entice other investors to purchase this extra supply bond yields are rising.
Absent WWIII or Great Depression II I don’t think we will ever see 30 year fixed rate mortgages in the 3’s again.