Interest Rates rise a bit this week

Interest rates for buying a home on the Palos Verdes Peninsula rose slightly again this week.The following are excerpts from the newsletter on interest rates published by HSH Associates :

“Mortgage rates firmed a little bit more this week, cresting at the highest levels in six months, but it appears that the four-week rise in rates is over, at least for now.

The global selloff in bonds — essentially, a repositioning by investors in light of changes in currencies and central bank programs — pushed mortgage rates up by a little more than a quarter percentage point from the 2015 lows of mid-April.

QE-style programs in the Eurozone may be having some beneficial effect on that economy, and present indications are that the U.S. economy has weathered a soft patch, even if may have left the growth trajectory here on a lower path. It bears keeping in mind that the lowest interest rates are often seen when times look bleakest, and in present times, also when central banks stand idly by. The ECB began buying bonds not all that long ago, but the move seems to have soothed frazzled investors who now are expressing more of a preference to seek out higher-yielding opportunities, rather than stuffing all their holdings into safe and secure government bonds. If intertwined global economies can all start to move upward, even to a muted degree, firmer interest rates will be the result.

Given the whims of global investors, it’s hard to say with much conviction that the entirety of the rise in interest rates is complete. Some have likened this change in positioning to the “taper tantrum” seen in U.S. bond markets back in 2013, when then-Fed Chairman Ben Bernanke mentioned that the U.S. QE programs would eventually need to end. The current situation seems a bit different, and so far at least the effect is by far more muted on mortgage rates.

Borrowers in the market need to be aware that for much of this year we have been in a volatile period for rates. At times, the volatility is beneficial (as it was a month or two ago) and sometimes not so much, as in the present period. In terms of the big picture, though, little has changed, as we’ve only nudged off recent bottoms. Mortgage rates remain favorable to homebuyers, if less so, and as we’ve seen before, even small rises in rates chill refinance activity to a considerable degree.

It seems to us that the rise in rates has leveled off, and indications are that we should expect rates to drift back a little next week. We had hoped for as much this week, but that turned out to not be the case, as we saw more whipsawing in underlying yields with an overall upside bias. It’s probably optimistic on our part, but we think that a 6-8 basis point fall by the time the week comes to a close is most likely.”

The following are interest rates quotes from American California Financial: