There have been a lot of headlines in the news today talking about the upward movement in the 30 year home mortgage rate over the last several weeks. The average home mortgage lenders rate sheet jumped by almost a half of a percent in just the last four weeks and rates now stand higher than they have been in the last 6 months.

Frank Nothaft, vice president and chief economist of Freddie Mac, explained:

After Europe made strides in its debt situation, investors left the security of U.S. Treasury debt causing bond yields to rise and mortgage rates along with them. Interest rates for 30-year fixed mortgages are now almost a half percentage point higher than the record low set in mid-November.

We saw mortgage bonds start a massive sell off after Federal Reserve chairman Ben Bernanke’s statement announcing QE2 several weeks back, and the ironic thing about this current trend is that QE2 was intended to bring rates down and keep them down for an extended period of time. Investors on Wall Street began to panic sell due to the fear of inflation and devaluation of the dollar.

A few weeks later Mr. Bernanke was featured on 60 Minutes adding more commentary about our economic condition, and the next day we had another massive sell off. Add this to our current President’s promise to extend tax cuts, and investors are scratching their head with confusion

All that to say, mortgage rates have been on the upward move, and it seems there has been no end in sight.

No one has a crystal ball and can predict what will happen from this point forward.

As I contacted my clients last week to advise them to cut their losses and lock in their loans, I reminded them “In the scheme of things, a 4.5% interest rate, is a great rate.”

For prospective home buyers that have been speculating on the price of homes dropping over the next year, here is something to consider. If you are planning on getting a Redding home mortgage loan to buy that house, beware. When betting on the market to get better, you MUST also consider the cost of credit.

Below is a table showing the impact rising rates have on the monthly payment – even if prices continue to soften: (thanks to friends @ KCM)

Happy home hunting and Merry Christmas!!