Editorial: What Is Causing Interest Rate Fluctuation?

Posted by:  Michael Chalker
2017-10-16 12:45:35

Editorial: What Is Causing Interest Rate Fluctuation?

Last month, I spoke about how interest rates will start going up.  As predicted, they have continued their ordinary and usual fluctuation process -- call it the cycle of life in the world of interest rates.


When looking at the numbers for October 2017 versus September 2017, the forecast was accurate, as there is a definite interest rate upsurge of approximately .25%.  To illustrate, .25% hike would increase a house payment by about $36.00 per month on a $250,000 loan.  While that quarter percent increase over thirty days is higher than average, and I would not expect to see a quarter percent increase every month, rates will continue to go up because we have been at an unprecedented low for far too long.


To expand on the need for market correction, this week, we are going to take a peek behind the proverbial curtain and ask the ever important question of why do rates fluctuate so much.  While there are multiple influences, one very significant factor is known as the Geo-Political Environment.   Believe it or not, the world economy, including that of the United States, is very closely tied to the stability of other countries, and their political agendas.  Currently, that Geo-Political Environment is being influenced by North Korea and many of its actions are pushing rates lower. 


Another occurrence that is causing rates to go up at this time is the unwinding on the QE1 and QE2 (Quantitative Easing).  The Federal Government is selling off its ownership of mortgage-backed securities, and this will continue to produce increased rates in the near future.    


The market must correct itself.  So the reality is that rates will continue to climb, and your budget, as previously suggested, will be impacted.  So if you the consumer are considering a new home purchase or refinance, please give us a call sooner than later, because even a $36 payment increase can sometimes mean the difference between a deal and no deal.


Michael Chalker is the Branch Manager of our Gilbert branch.


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