As the monetary madness continues around the globe continues, what is happening is stunning.
Here is a portion of what Peter Boockvar wrote as the world awaits the next round of monetary madness: Coincident with the spike in Treasury yields, bankrate(dot)com said the average 30 yr mortgage rate rose another 11 bps yesterday to 3.88%, up 41 bps over the past week. It’s the highest since early January and here is a chart giving the visual of the rapidity of the move…
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I look forward to seeing mortgage applications tomorrow to see the initial response. To quantify, at last Monday’s 30 yr rate of 3.47%, a $300k mortgage would have a monthly payment of $1,342.12. At the 3.88% rate, the monthly payment would increase by about $70 to $1,411.57, a 5.2% increase.
The cost of capital is of course going up across the board and while I’m optimistic about growth initiatives to come, we’ve got to get past the move higher in rates because business activity and asset price gains have been built on the foundation of low rates over the past 7 years (as in the prior expansion). The US and the world also have an extraordinary amount of debt that has accumulated which has created the dangerous tinder for this rise in interest rates.
King World News note: Mortgage rates based on the 10-Year Treasury have been headed dramatically higher as bonds plunge (see crashing chart below).
10-Year Treasuries Continue To Plunge As Interest Rates Rise
King World News note: To illustrate how dramatically this has impacted mortgage rates, Wells Fargo’s posted rates for a 30-year conforming loan have risen in the past couple of weeks from 3.5% to 4.25%! That’s 3/4 of a point higher in just a couple of weeks. This will not bode well for the real estate market if the trend in higher interest rates continues.
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