[Up, up and away] Mortgage rates on the rise
It seems that the lowest mortgage rates are behind us and today's 4.75 percent will likely be 5.00 or 5.50 percent early next year. While that is still a very attractive rate, 4.00 percent will soon be a distant memory.
A combination of events has pushed 10 Year US Treasury rates higher in the past 2 months. And while mortgage rates are based on the price of mortgage backed securities and not 10 year treasuries, there has always been a correlation between the two.
Recently, the Fed announced QE2 designed to create inflation, boost stock prices, lower unemployment and create consumer demand.
The announcement of an agreement on extending the Bush tax cuts (and by the way, I hate that the tax cuts are still referred to as the "Bush tax cuts") along with several other government spending programs are both inflationary.
The budget deficit is skyrocketing increasing the risk of inflation down the road.
And if you haven't guessed by now, inflation is bad for bonds and increases interest rates.
Photo courtesy of flickr by Kissimmee - The Heart of Florida