Are We There Yet?

...at the bottom of the rate curve that is?

I cannot say for sure as my crystal ball in the shop for software upgrades.

I do think we are very close the end of interest rates in the High 4’s and Low 5’s. For one thing, the FED has announced it will stop buying mortgage backed securities and they are currently buying 80% of the new mortgages written in the US.
Calculated Risk, an insightful web site that tracks the movements of the housing and mortgage markets, has supplied evidence to support the coming rise in rates. Calculated Risk has noted the close relationship between the 30 year conventional mortgage fixed rate and the yield curve on the on the 10 year treasury note. Based on statistical analysis posted on their website, Calculated Risk is expecting to see rates rise to 5.5% based on the current yield of 3.45%

You have to be careful as statistics imply a certitude that does not always exist. It should be noted that the aforementioned model has a determination coefficient ( statistics speak for predictive value) of .97 which is very high. Today’s fixed rate is lower than 5.5; that difference is due to the FED purchasing Mortgage Backed Securities and Pre-payment speed and randomness ( refinance activity)

Look for rates to start moving up in the next couple months.

An Argument for Higher Rates

Our reasons for expecting mortgage rates to rise have been well documented: soaring gold prices, rising commodity prices, a weak dollar on the international stage, record federal deficits and a record low federal funds rate. To that, we will add the Federal Reserve's acknowledgement that household spending "appears to be expanding" and economic activity "has continued to pick up."

At this point, we would welcome rising interest rates. Rising interest rates are a byproduct of rising economic activity, and rising economic activity necessitates rising employment. If there is one thing our economy needs more than anything, it is rising employment. Low interest rates, low housing prices and tax credits are all well and good, but their impacts are dwarfed by employment. If you don't have a job, low interest rates, low housing prices and tax credits are meaningless.

What's more, rising interest rates would stimulate activity. Potential borrowers have grown languid over the past few weeks; there is no urgency to get out and buy or even refinance a home because of expectations for a prolonged low-rate environment. Rising rates would change those expectations and prompt many potential borrowers to act.

In the meantime, we still think prompting them to act before rates start rising is not such a bad idea.