IS THIS THE END??

Rates are definitely on the rise, there is no disputing that, just look at the ten year treasury yield this past month. But is it time to panic?

Unfortunately the market is scared of the rate increases which, in turn, is causing their borrowers to become fearful.

Let PCS Colorado - The Lana Rodriguez Group help alleviate some of that fear and frustration. Our trusted lenders have experience in these types of rate environments. Our trusted lenders have decades alone in the business. This is not new trend and rates have historically been used to battle inflation.

Let’s put things into perspective.

Rates in 1970 were in the mid-7% range, and they moved up steadily until they were above 9% in the mid 1970s. By the end of the 70s rates were over 11%.

To counteract hyperinflation (sound familiar), the Federal Reserve raised short-term interest rates. This made money in savings accounts worth more. On the other hand, all interest rates rose, so the cost of borrowing money increased, too.

Interest rates then reached their highest point in modern history in 1980s when the annual average was over 16%, according to Freddie Mac.

The average mortgage rate in 1990s was just over 10%, but it slowly fell, finally dipping below 7% in 1998. Still nowhere close to where we are at currently.

The 2000s saw Mortgage rates steadily decline to the high-5% range by the mid 2000s.

Then the housing crash happened. Due to ARMs, stated income deals, and banks giving loans they shouldn’t have (watch the movie “Too Big to Fail”). This left many homeowners being upside down and many just walked away from their homes which caused values to drop.

To provide some relief and to stimulate the economy, the Federal Reserve cut interest rates to make borrowing money cheaper.

Short-term rates, or the rates at which financial institutions borrow money, ended up being slashed to the point where they were at or near 0. This made it extremely cheap for banks to borrow funds so they could keep mortgage rates low.

As a result of this change, mortgage rates fell almost a full percentage point, averaging 5% in 2009.

They continued to fall steadily and were in the mid-3% range by 2012. In 2013, rates went up to 4%.

In 2015, mortgage rates fell slightly to 3.85%.

Although they were a little higher to end of the year, rates in 2016 averaged 3.65%.

Rates began to rise after the 2016 presidential election. They reached their peak at the end of 2018/start of 2019. Rates on a 30-year fixed rate mortgage ran between 4% on the low end and 5% on the high.

As you can see, there is nothing to fear, yet. This is normal. But it is important to strike while the iron is hot. If you’re feeling a little stressed by what you are being told, give us a little whistle and we will be your guide. It’s important who you work with…