A Peek Into The Future. How Experts Predict Mortgage Interest Rates.

Ouch.  If you're seriously considering homes for sale in Southlake, Keller, Argyle or , well... anywhere in the DFW Metroplex, you've seen interest rates jump significantly since the first of the year.

It's important to pay attention to interest rates because increases will change  what you can afford. (Let us know if you'd like to see the effect of different interest rates on your desired loan amount.)

How Can You Tell Where Mortgage Interest Rates Are Headed?

While my crystal ball has been cracked for years, it's a pretty safe bet to follow the10-year treasury yield.  It's not so important as home buyers to understand why mortgage interest rates move along with the 10-year treasury yield.  Just know there's a correlation.  Take a look at this graph showing the correlation between the two numbers over the last 50 years.

So Which Direction is the Treasury Yield Going?

To follow the Treasury Yield means watching sources like The Wall Street Journal.  The publication just surveyed more than 75 economists to find out where they projected the treasury yield would move over the next few years. The results were a pretty tight range of opinions that put the treasury yield at 2.84% by the end of 2024. Looking at the last 50 years of spread between interest rates and treasury yield, that suggests mortgage rates at about 4.5% .

Now keep in mind, while a 50 year history of correlation is impressive, it's not an exact indicator.  Especially in the unusual economic climate we're currently going through.  But homebuyers should certainly understand the relationship to get an idea that mortgage rates are going up.  With that in mind it may be wise to purchase a home sooner rather than later, if you’re able.

The Take-Away

If you’re a first-time homebuyer, or a current homeowner thinking of moving into a home that better fits your changing needs, understanding what’s happening with the 10-year treasury yield and mortgage rates can help you make an informed decision on the timing of your purchase. And the best timing appears to be now.