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Mortgage rates will keep rising, but Loan Officers shouldn’t worry

People still want to buy homes!

The Federal Reserve is widely expected to maintain the rising interest rate environment for the foreseeable future.

Analysts at investment management firm Alliance Bernstein, posting this on equity research crowdsite Harvest, provided three main reasons why the Fed will continue to raise interest rates for the rest of 2018.

The first is the strong economy; consumer confidence means higher rates. Second is rising inflation, which means economic growth can afford higher rates of lending (see first point, too). Third, the budget balance is not improving. All three of these things push up the rate of Treasuries issued by the government.

What does this have to do with mortgage lending?

As the 10-year Treasury continues to increase, so will the 30-year mortgage rate. Combine that with the Fed also raising rates and there is little change interest rates will be going down anytime soon.

After taking all the numbers in, First American chief economist Mark Fleming blogs that, as long as rates stay below 8% (which they will) home affordability will remain strong enough to withstand the growing, higher costs to borrow.

“The recent increase in the 10-year Treasury yield indicates higher mortgage rates are likely in the very near future. But, even as mortgage rates increase, we remain well below the historical average of about 8% for a 30-year, fixed-rate mortgage – and house-buying power remains strong.”

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