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Rates mysteriously rise rapidly

By Holden Lewis ·
Thursday, December 9, 2010
Posted: 11 am ET

Mortgage rates hit a high last seen in early June in this week's survey. Marcie Geffner investigates why.

The 30-year fixed has gone up almost half a percentage point in five weeks. I don't think I've seen a complete and convincing explanation for why mortgage rates have risen so quickly.

Geffner mentions the Fed's quantitative easing, concerns about eurozone debt, and some promising data about employment. Freddie Mac economist Frank Nothaft says today: "After Europe made strides in its debt situation, investors left the security of U.S. Treasury debt, causing bond yields to rise and mortgage rates along with them."

Those explanations don't sound sufficient to explain the full scale of what's happened. I have a hunch that bond markets overreacted, and that rates will come down a bit in the next days and weeks. My view is firmly in the minority in this week's Rate Trend Index, in which 80 percent of respondents said they believe mortgage rates will rise over the next week.

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Joe Shea
January 17, 2011 at 6:27 am

I think it has to do with a quiet panic in progress over the future of the dollar, crystallized in today's visit to the US by Chinese premier Hu Jintao, who wants us to agree to an end to the dollar-denominated international currency system. Hiding well below that issue, which is an enormous one for us and one that will certainly overwhelm current bond yields as it disparages our bonds, is the possibility he is going to ask us to redeem our debt in U.S. gold, and I think we may not have enough. He has $2.3 trillion in US Dollars in his foreign reserves, the Wall Street Journal reports today (1/17/2010).

Joe Shea
January 17, 2011 at 6:20 am

I think the reason is that Hu Jintao has come to the US to get us to agree to abandon the dollar-denominated international currency system. He has $2.3 trillion in US Dollars in foreign reserve to back up his "plea." Bur=t frankly, I see a more panic-inducing purpose to his visit: I think he's going to ask us to redeem our debts in gold. I;m not sure have that much gold.

T. Lee
January 05, 2011 at 1:56 pm

Bank rates suddenly and "mysteriously" escalate...
Republicans are sworn in and are now the House of Representatives majority...
Republicans are "big business", "trickle-down economics" advocates...

Back to bank rates suddenly rising...hmmm....ya think....nah...probably just a coincidence

Joe murphy
December 29, 2010 at 9:39 am

I have seen the rates jump first hand. As a real estate agent I had people closing loans in the 4-5 range. Most recent loan that closed was at 5.5%
still I think that now is the time to buy. 2011 should be the year to be a home owner

John Q Public
December 27, 2010 at 11:42 pm

I just want to vent...

I *want* to buy a house. Even at 5% that'd be the lowest interest rate I've ever had on a house. But it seems like only investors (paying with cash) are the ones able to buy houses right now. I don't think it's because people don't want to buy. I'm self employed (strike one because they have eliminated stated income loans), I have no equity in my current home because I bought in 2005 (strike two), and don't qualify for government assistance programs because I already own a house that I can't sell because it's worth less than I owe (strike three). Note that my credit score is excellent and I have the down payment in full. But it's a completely different world out there than it was five years ago.

The press seems to paint a picture of home prices being the lowest in decades but hardly anybody is buying, which is true, but the bigger story is that people want to buy, but can't, because they are either locked into what they have or they are eliminated from being able to buy because of the banks becoming so restrictive.

I don't know why more isn't reported on all the people who WANT to buy these amazing foreclosure and distressed property deals and would have qualified over the phone for a mortgage five years ago but now are automatically disqualified even with credit and cash. Because THAT'S the real reason why the houses aren't selling and the market isn't recovering.

Matt Carter
December 10, 2010 at 1:31 pm

Sorry, that link was to earlier version of the bill. The Joint Committee on Taxation has a new report out on the compromise plan hammered out by the Obama administration and Republicans that estimates extending the Bush tax cuts and unemployment benefits would add $857 billion to the federal debt over next 10 years. Should be up here soon:

Matt Carter
December 10, 2010 at 1:21 pm

This might have something to do with it. Rxtending tax cuts, unemployment is not going to be cheap: