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When will Interest Rates go up?
To make a prediction you must first understand our current economic situation, then look to what makes mortgage interest rates fluctuate and why.
Current Economic Situation:
The United States has been printing money.
Printing US $ = US $ value decreases
Commodities (wheat, cotton, lumber, oil) are traded in US $
US $ Value decreased = Price for commodities increases
When the cost of purchasing commodities increases people have less to spend, therefore slowing our economy.
Spending decreases = Government decreases rates to stimulate spending
Why are rates so low?
Right now everyone thinks the sky is falling because of negative messages in the media.
Fear in market place = People looking for safe investments (bonds)
The more people buying bonds drives the bond yields down.
$ Out of stock markets > $ Safe bond investments>Bond yields decrease and mortgage rates decrease
It is important to note that fixed rate mortgages follow bond yields.
When will rates change?
When people start to realize the amazing opportunity in our market.
S & P 500 returned 3.71% over last 10 years in totalBased on the average house price in Canada, over the same 10 year period; real estate went up 232%
House prices are low, and people are starting to see the value in investing in a tangible asset (real estate)
$ Out of bond market > $ Into real estate > Bond yields increase and mortgage rates increase
Once the market place catches on to this, it’s only a matter of time before prices and rates go up. Don’t miss out!
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