Interest Rates are Getting Interesting, Very Interesting….
The average overnight rate on a 30 year fixed mortgage jumped another 9 basis points this week to 4.61% and the highest level we have seen since the week of May 8, 2011.
It has been five years since the Fed began it’s quantitative easing program designed specifically to hold interest rates at artificially low levels to help the economy get back on it’s feet. The party appears to be over as all signs point to a pullback in the current quantitative easing program starting next month. Nothing dramatic right off the bat but most expect the current $85 billion in monthly purchases will be trimmed to $70 billion in September and stepped down periodically through June when the program would end.
It is pretty straight forward that if the Fed does end the program by June we should expect interests rates to return to more historical “normal” levels by that time. Where that may be is a matter of conjecture but one would assume they certainly will rise to at least 6%. The last time we saw rates above 10% was back in February of 1990 and we can hope that is not the direction we are headed…….