Mortgage rates are headed higher. Lock all rates at application, regardless of closing date.
The trend is clear; the Fed believes it has done all it can to stave off the banking crises and is now focusing its efforts on inflation. This morning, retail sales were up and the dollar is strengthening. If stagflation is the fear, the current strategy of targeting core inflation may be abandoned for the more radical Paul Volcker-style approach to tame inflation.
While I believe the higher mortgage rate cycle will be shorter than the 80-s style interest rate hikes, it’s clear to me that Bernanke is talking differently than he did in 2006 and 2007.
The effect? We could see mortgage rates rise as much as 2% in the next two years. I still believe that a five year ARM will offer the best solution because interest rates move in cycles; I think we’ll see mortgage rates under 6% again in 2011. Today? The trend looks like we’re headed higher.
What then, should be your strategy? Continue reading this post