Monday, July 21, 2014

Inflation worries mean higher mortgage interest rates?

Inflation is the arch enemy of mortgage bonds and erodes bond prices.  The lower the bond price goes, the higher the mortgage interest goes.  The Federal reserve has done an excellent job of balancing growth of the U.S economy and their bond purchasing program has kept demand for Mortgage bonds high and mortgage rates low.  

With the latest poll from the Rasmussen Reports confirming what is happening with prices that we are paying for groceries, consumers are not confident that the Government (the Federal Reserve) won't have success in controlling inflation once the economy gets into full swing again.  If this becomes true , rather than a survey of what American's think MIGHT happen, we will see mortgage rates go up in the future.  

The Federal Reserve will be exiting the bond purchase program in October, 2014-this is their most recent estimate) and with inflation worries, this may be the best and last time to see these mortgage rates at the lows they are currently at (today's rates are the lowest they have been in 15 months). 

The report said that the number of Americans who are paying more for groceries also has risen to its highest level in over two years. There's an increasing lack of confidence, too, that the Federal Reserve Board can keep inflation under control.

A new Rasmussen Reports national telephone survey (95% confidence) finds that 88% of American Adults say they are paying more for groceries this year than the year before. 
This finding is up six points from last month and the highest since May 2012. Only seven percent (7%) say they are not paying more than they were a year ago, the lowest finding since January 2012. Five percent (5%) are not sure. 

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