03/21/2022
Rates have continued their upward trend with par rates nearing and exceeding 5% for many buyers. As expected, the Fed has moved to begin raising rates and shedding mortgage securities over the next year.
In addition to raising their rate by 0.25% and indicating they will continue raising rates at each meeting well into next year, the Fed has also taken the first steps to surrendering a portion of its mortgage-backed securities. This move alone could have some drastic consequences for the mortgage market, though experts are mixed regarding the degree of the effect. The Reserve Bank had been adding as much as $40 Billion of mortgages to its asset sheet every month to keep the market liquid, and is one reason for the higher prices seen the last few years. If a correction is going to happen in the market, expect one this year as these changes to the secondary market impact investor willingness to throw money at real property.
Meanwhile, these higher rates may tempt people to explore ARM options. As a rule, continue to urge against that gamble. The last few years of rates have been exceptional, and expecting them to return after the current crunch may not be advisable. ARM options are often better suited to short to mid term plans for families who move frequently due to work or school, as opposed to chasing rates.
