Anyone who has ever taken a basic middle school science class will recognize this scenario. Animals live in an ecosystem. When one part of the system is affected it ripples throughout the rest of the system. Our economy is quite similar. When one sector is impacted negatively, it ripples out to other parts of the economy. This is evident in the recent rise in fuel prices and its effect on mortgage rates.
Fuel Prices Have Immediate Impact
When the price of oil rises, like it has in the past month, it has an immediate impact. The price for gas goes up. Companies that depend heavily on fuel, such as delivery companies, will raise their rates. Over time, the merchants will pass this rate increase on to the consumer through higher prices. This same ripple movement will actually affect the Jumbo mortgage rates as well.
Higher Fuel Leads to Inflation Worries and Higher Rates
When the price of fuel goes up the economic experts fear that inflation is headed our way. This causes investors to shy away from the mortgage bonds. A decrease in mortgage bond activity will lead to higher interest rates. Everything moves along like the ripples in a pond.
What to Do?
The obvious answer is to lock in your jumbo mortgage rate before more fear and speculation drives rates up higher. The Federal Reserve has already hinted that taking action in the next quarter is not necessary. This could signal a small increase in rates, leaving you missing out on a great opportunity.
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Category: Jumbo Loans