Looks like mortgage rates are on the move… I suppose you can’t have your cake and eat it too!
As we watch the myriad of economic indicators go from flashing “danger” to giving the early signs of a possible crescendo (to the decline… or the double-dip decline) it’s important to consider the extent of the government manipulation and how it contributed to the current trends.
Clearly, the Fed’s actions brought mortgage rates down … that WAS (or still is) their intention.
The immediate result of the rock bottom lending rates was a boom in re-finance activity and a slight (barely noticeable) blip in purchase activity as witnessed by the MBAs mortgage application survey (see super-dynamic interactive and zoom-able chart below).
But have these actions truly helped the situation?
Is it sensible for the government to forcibly push rates to literal historic lows just to preempt the inevitable un-wind of obviously fraudulent and grossly inflated home values?
Well, as even “sort-of-free” markets generally don’t always abide by the will of the current crop human do-gooders the latest trend in the 30-year conventional mortgage rates may prove temporary or it could signal a rebound off of a level that was essentially unnatural.
And so what happens if the average 30-year fixed mortgage rate heads back up to the more statistically normal 6-7% range?
Let the real healing begin!