Understanding Mortgage Rates | dripp inc | Home Equity | Refinancing and Remortgage Guide

Good Afternoon,

We have another chance to take advantage of mortgage interest rates today because of the strength the 10-year bond this morning. The general “rule-of-thumb” that higher inflationary levels cause a sell-off in bonds is not in play today. Take advantage of this unexpected lack of reason, because it is in your favor.

Here’s the inside Dripp…

Let’s start with a question:
What the heck is going on here??? The Consumer Price Index (CPI) for July returned double than expected results. Prices have increased, which means inflation levels have increased. If inflation is higher than expected and if bonds are supposed to be sold because of this, why is the bond market so strong today? As a general rule, bonds should be getting sold left and right and rates should be going up, but in a volatile economy anything can happen.

What’s the reasoning behind it today?
Well, my analysis brings us to another form of trading that I did not want to mention because of how much more confusing it gets. After all, our goal at Drippinc.com is to break down the mortgage market in the simplest way for the people who are not trained in finance or mortgages. We want to help you understand the decisions you make about your home mortgage and, more importantly, to know WHY you are making these decisions.

To answer the question:
The trading I am referring to is commodity trading, such as gold, silver and platinum. Today these commodities are all down, which begs the question, “Where is all the money going?” If you were thinking “bonds and stocks” you are correct. However, did this strength in the bond market help interest rates today? Not as much as you would have hoped because of the growing spreads I’ve been talking about in previous posts, but the good news is that the inevitable increase in interest rates has been temporarily delayed. This gives you another chance to take advantage of your mortgage financing. In other words, we live to fight another day.

Now, unless you want your life to consist of constantly following all these different aspects that influence the market, stick to the basics and let us help you along the way.

Simply Put: You have another chance to take advantage of solid interest rates before things get worse. Consumer prices came in higher than expected stimulating a greater inflation fear. If prices are up, YOUR money buys less…that’s inflation. This is usually bad for the bond market, but not today. The reason is because there is a lot more to take into consideration, such as commodities, but fear not! You do not have to understand how everything works unless you are a trader. Check in with us, learn the basics and make more informed decisions. You’ll be fine!