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And the survey says:  Minnesota and Midwest mortgage rates for buying or selling homes are ready to rise. We’re talking about VA Loans, FHA and conventional mortgage loans, we’re talking about the ability to buy or refinance a home with any mortgage. Yikes! Not the results we wanted. But here it is, and we’re going to tell you why.

The Mortgage Bankers Association (these are the suits that sit around those humongous mahogany tables and talk about money) releases regular surveys on the state of the mortgage market. In their February 3^rd report their Vice President states “we expect that rates will rise over the next few months….”  So there you have it; mortgage rates in Minnesota and the Midwest (and nationwide) are expected to rise.  Now let’s look behind that prediction and why they come to that conclusion. Oh gosh, here we go into the weeds again!

Remember the stimulus bills that our federal government used to bail out the financial sector this year and last?  Part of that bail out effort is the Federal Reserve buying up about a trillion dollars worth of Mortgage Backed Securities (MBS). When you get a loan to buy or refinance a house the bank then bundles that loan with others and sells them in the secondary market. Many of those mortgage bundles turned into toxic assets that no one wanted to buy. The houses financed are worth less than the loan amount. So here comes the Fed willing to create market demand by buying up these toxic assets.  They’ve been doing this for months. As long as there was demand for these securities rates were kept at historic lows. Here’s the bad news for mortgage rates; the Fed is about to quit buying. Thus, the Mortgage Bankers Association can say with some confidence “we expect that rates will rise”. So what does this mean to you, to Realtors and to me at VALoansMN? What will happen to the housing or mortgage market when this occurs?

Do you have clients that are still looking for that perfect house? Do you have clients wondering whether to refinance out of that variable rate loan? Given the outlook of the experts we recommend a serious talk about what substantial rate increases might mean to the ability of these clients to achieve their goals. Put a big red ‘X’ on April 1 of your calendar. That’s the beginning of the 2^nd quarter and perhaps the beginning of the end of low mortgage rates. Are your clients ready?