Skip to comments.Mortgage rates defy forecasts
Posted on 05/10/2014 1:22:36 PM PDT by Kid Shelleen
As 14 arrived, experts were confident that the 30-year mortgage rate would rise to at least 5% this year as the Federal Reserve cut back a bond-buying program, which had depressed the rates to unheard-of lows in 2013. So much for the experts.
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If rates rise, what happens to home prices???
I suppose if people want to sell their homes the prices will have to come down to compensate for the increased interest portion. Or the buyer will have to settle for less home. If the max I can pay is $750 a month, it is irrelevant the proportions of principle vs interest. I don't have it, then I don't have it.
Not to worry, the feds will just lower the lending standards and worry about the defaults later.
My theory about interest rates is that the Fed “taper” is smoke and mirrors. Buying is still being done through proxy buyers to prop up support for treasuries & keep rates low.
I’m not sure of the how it’s done technicalities, but I also believe the Fed is providing “incentives” to foreign central banks to purchase them. A big house of cards that has got to be very unstable.
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My theory is that the market knows the economy is weaker than reported and that interest rates are not likely to rise soon.
that would not surprise me.
If course they know it. Everyone knows the unemployment figures are complete propaganda.
The question is really, how is the fed keeping interest rates low while supposedly tapering? The fed, in some underhanded fashion, is helping manufacture ersatz demand for the treasuries it is now not buying.
Consider this, regardless of the so called strength of the US economy, even supposing it were robust and real unemployment was low, the federal government CANNOT pay higher interest on the federal debt. Traditional level, i.e. real market, interest rates will cause the cost of the federal debt to consume the *entire* federal budget. The fed and DC are dancing as fast as they can. The very simple fact is that, to avoid an unprecedented disaster, they will *never* be able to allow interest rates to rise much at all. Never.