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The economy improves

July 21, 2011 by Michael Santos Leave a Comment

 

If you want to know what will happen to mortgage rates in 2011, watch what happens to the economy.

As we write this, the economy has put in about six quarters on the positive side of the economic ledger, and Federal Reserve stimulus and the recent tax agreement seem likely to ensure that growth continues on an upward track in 2011. The labor market recovery should continue to gain momentum as the year progresses, but unemployment will remain stubbornly high for perhaps years to come.

That said, continual but gradual improvement seems likely. As the economy finds firmer footing, so will mortgage rates. After being pressed to 56-plus-year lows in 2010 by various crises, deflation concerns and government manipulation, we may see a bit of the other side of the coin in 2011. Although the Fed will keep short-term interest rates low, it is unlikely to leave them at emergency levels forever; as the economy recovers, the market will probably demand that the Fed begin to raise short-term interest rates and back off on policy “accommodation” in order to avoid an inflation problem.

Because it would tend to temper any outsized growth potential, which in turn would trim inflation concerns, any rise in short-term rates (whether directly or through the process of managing currency reserves) should keep long-term mortgage and other interest rates from rising too far. As we begin 2011, mortgage rates have moved off recent bottoms and have probably overshot where they should actually be, given current economic conditions.

Filed Under: Economy, Mortgage

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Michael Santos NMLS #199875 • MLB Residential Lending, LLC. NMLS# 1101220. Michael originates NJ loans only. MLB Residential Lending, LLC. is located at 51 Commerce Street, Springfield, NJ 07081, 732.243.0140. MLB Residential Lending, LLC. NMLS#: 1101220 is a residential lender, licensed by the NJ Department of Banking and Insurance; licensed by the PA Department of Banking and Securities; licensed by the CT Department of Banking; licensed by the DE Dept. of the Banking Commissioner; and is licensed under the FL Mortgage Lender Service License # MLD1128. All rates are subject to change without notice. MLB in no way, claims to represent or to conduct business on behalf of HUD, the FHA or the Federal Government. This site is not authorized by the New York State Department of Financial Services. THIS SITE IS INTENDED ONLY FOR NJ CONSUMERS.

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