30 year fixed mortgage rates shot up to their highest levels in six months last Wednesday.

Fannie Mae mortgage backed securities (they serve as the foundation for mortgage rates) dropped by -231 basis points in just three days.

Many borrowers that had been pre-approved for loans with interest rates in the upper 4’s found out that their new rates could be in the mid to upper 5’s.

We did make a comeback on Thursday and Friday but this still left us -82 basis points worse than Monday’s rates.

The reasons for the deterioration in rates?  It was really a powerful 1-2 combination that set up our perfect storm.  First, foreign investors showed their concerns over our constant barrage of Treasury sales.  As we continue to auction off more and more of our Treasury debt, we naturally must pay a higher rate to borrow that money.  That puts pressure on your mortgage rates.

Also, we received a few economic reports such as Consumer Confidence that pointed to positive economic data.  Any kind of economic data that is positive will lead to higher mortgage rates as long-term investors fear the threat of eventual inflation that is a byproduct of a growing economy.

Obviously, as we slowly climb out of our recession we will start to get more and more positive economic reports which will lead to this very same type of volatility.

The silver lining?  Mortgage rates are still fantastic and borrowers that have been sitting on the sidelines were sent a huge wake-up call.  It is simply not worth the risk to wait for lower rates.  The opportunity cost of missing out on home prices that are artificially and temporarily too low is not worth waiting for lower rates.

The purchase market is about to heat up.  We have great rates, large inventories of homes, and reduced home prices…this all adds up to the right time to buy.

Courtesy of Brian Bagon Crest Mortgage Group

Tags: 30 year fixed mortgage rates, Add new tag, consumer confidence, Fannie Mae Mortgage backed securities, Interest rates