Are Mortgage Rates Heading Higher?

Long-term Mortgage Rates are based on the investment appetite of mortgage backed securities. In recent years, there has been a lot of foreign buying of our Bonds, including these mortgage backed securities.  And this foreign buying has helped keep our interest rates low.  But times are changing, as Bond yields in other major foreign markets have been gradually rising.  For example, when comparing the yields of US Treasuries with those of Great Britain, it was common in recent years to see US yields higher than those offered in Europe.  But now, things have changed, and Bonds in Great Britain actually offer higher yields. 

Foreign investors have more of an incentive to keep their money "closer to home" in their own countries, and this has the effect of less foreign investing in our US Bonds.  Foreign purchases of our Bonds has averaged $16 Billion a month this year, down from $23.5 Billion a month for the previous year.  Should this fall-off in foreign support continue, it may pressure our Bond prices lower over time and thus apply upward pressure on our long-term interest rates.  

Only time will tell.

Larry Morris is a loan Officer with Equipoint Financial Network in Newberg, Oregon. He specializes in relocations and Sherwood, Oregon neighborhoods. He can be reached at larry.morris@equipoint.com. His website is www.PDX-Mortgage.com. This material is copy protected 2007 by Larry Morris, Mortgage News that Matters. All Rights Reserved