Bonds and your Mortgage Interest Rates

Mortgage brokers watch the interest rates every day, and what effects them.  The biggest influence on the interest rates is the bond market. 

 Investors have also been closely observing changes in the U.S. and looking for signs of whether the economic situation has improved enough for the Federal Reserve to decrease the amount of financial assets it buys in the markets — so-called tapering. The quantitative easing program, involving the purchase of US$85 billion of bonds each month, has preserved interest rates low and also helped fuel a strong rally on U.S. stock markets.

Traders also observed to the start of a two-day hearing by Germany’s constitutional court on the validity of a key European Central Bank program that has been recognized with calming the 3 1/2 year-old euro debt crisis. The Federal Constitutional Court is considering arguments against the European Central Bank’s offer to buy government bonds and lower borrowing expenses for indebted countries.   Adversaries of the bond-buying program say the program oversteps the European Central Bank’s mandate, which forbids it from financing governments.


Now how do these two items effect you?    Well when the appetite for bond purchases from governments "tapers off" that send the price down, which sends yields upwards.  I would appear we could expect bond yields to continue to rise over the coming weeks/months ahead. If bond prices go up, so do mortgage rates as they are correlated.   Less bond purchases, equals higher mortgage rates.  Which means more finding the lowest mortgage rate become increasingly important.   Call or text your Alberta Mortgage Broker soon to lock in a rate 403-807-8779