interest rates 2010 - 2013

The idea of a 30 year mortgage at less than 4% interest is preposterous. It’s not something that’s likely to happen, unless your country’s reserve bank is in the midst of its most ambitious stimulus program in its history. The Fed’s aggressive programs have lowered interest rates to a level many would consider “unnatural”. This was the point, in order to stimulate borrowing. But many weren’t interested in borrowing and banks weren’t very interested in lending at those rates.

The 30 year mortgage rate has been below 4% more or less since late 2011. The ten year Treasury rate is widely considered a benchmark for all interest rates as you can see. This is the rate the government pays to borrow for ten years. The Fed’s programs have lowered rates and kept them there all this time. For comparison, a 30 year mortgage went for 6.5% at the peak of the housing bubble.

But in the last few weeks, something has started to change. Interest rates are moving up. They haven’t moved like this since 2010 back when we were worried about a government shutdown http://www.foxnews.com/politics/2010/12/17/senate-weighs-short-term-budget-fix-prevent-government-shutdown/. But there’s no worry about that today. The government is running, and with smaller budget no less! Interesting that now government rates go up. So are these rates moving naturally and will this continue?

Let’s not jump the gun. Movement this much this fast is rare, and likely to pull back some. But these interest rates are higher than they’ve been in close to a year without a prevailing explanation for why, and they got here quickly.

While higher interest rates aren’t a great thing for borrowers, it could reflect increased demand from borrowers anyway. This is the type of borrowing our economy has been waiting for for years. If it’s happening that is. Keeps your eyes on the rates. They’re still at historical lows. And at some point in the future, they won’t be.

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categories: economics, loans