I probably get this question asked to me at least once a day, so I thought I’d finally write about it.  First, NO ONE can tell you exactly what rates will do.  If I could tell you exactly what rates are going to do, I would have capitalized on my fortune telling capabilities a long time ago and would be sipping cool drinks on a very pretty beach somewhere.  Let’s start with mortgage rates in general.  Rates are determined by the market for mortgage backed securities.  This market typically follows the 10 year Treasury bond rate.  Since the rates are based on a market, they can go up, down, sideways or anywhere in between.  I always give the example of gas prices.  One day you can drive by the gas station and see one certain price for gas.  That evening, you can drive by the same station and see a different price.  Sometimes there’s a logical explanation for the change, sometimes not.  Mortgage rates do the same thing.  Mortgage backed securities trade on what an investor “thinks” the economy is going to do.  For example, when unemployment statistics are released, the mortgage market typically reacts.  Changes in the Gross Domestic Product or inflation also have an effect on rates.  In Presidential election years, mortgage rates are usually very volatile because no one knows what the outcome of the election will be and buyers are speculating on different scenarios depending on who wins.  2012 has seen a bit of volatility but not as much as in previous years.  The reason why?  We have issues to face that are much larger than a Presidential election.  The European economy, the US debt load, and other factors such as high unemployment are superceding the uncertainty of an election year.  As long as these things are prevalent, I do think that rates will stay low.  However, the slightest glimmer of hope in any of these areas will cause rates to climb.  If I were a borrower right now, I would pounce on these rates immediately.  There is no time like the present.  And just like any good sale at a retail store, when it’s gone, it’s gone.  Get it while you can!

About the Author: Jolynn Craig

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