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30 Year Mortgage Rates Primed for a Drastic Move

Posted on | July 7, 2009 | No Comments

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30 year mortgage rates are primed for a drastic move in one direction or the other.  By looking at the chart of the 10 year treasury rate, you can see it currently sits right at the 50 day moving average.  If there is a bounce off the 50 dma, look for average mortgage rates to head higher along with the 10 year.  I would imagine the 10 year would work its way back up to 4% before finding any strong resistence.  If this is the case, look for the 30 year fixed mortgage rate to get close to 6%.

If the opposite happens and the 10 year breaks down, it looks as if the 200 day moving average is the next support level and that is around 3.1%.  If the 10 year goes all the way down to the 200 dma, look for daily mortgage rates to go well below 5% again.  We might even see overall rates lower than they were in March.  Many home owners got the deal of a lifetime by refinancing in March, but if we see the 10 year break down, you might have the opportunity to get an even better deal in July or August.

With that being said, I firmly believe that the 10 year treasury rate will hold its current support level and head higher.  This means that 30 year mortgage rates are likely to move up over the next few weeks.  The government wants nothing to do with higher mortgage rates so they will do everything they can to put a cap on interest rates, but they might be running out of artillery for this battle.

Unfortunately, if average mortgage rates do move higher, they are likely to move much higher.  There is likely going to be a sling shot effect with rates, much like the one we saw in late May and early June.  The government has worked so hard to keep mortgage rates low that when they do break any trends, they move up very quickly.  If you remember those two weeks at the end of May, you can distinctly remember daily mortgage rates moving as much as .75% in one day.  I am not sure that it will get this volatile again, but I would look for a very drastic move.

The drastic move could very well be down as well, especially if we see heaving selling of the 10 year treasury rate.  As stated, I do not believe this will happen, but we have to report all possibilities at this point.  Make sure to keep an eye on the 10 year treasury rate over the next few days and weeks to make a better prediction of where 30 year mortgage rates are going.

Category: 10 year treasury rate, 30 Year Mortgage Rates
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