This year has been quite a roller coaster as it relates to the mortgage markets. Ten-year bond yields, which are a strong indicator of mortgage rates, started the year at 1.80% and ended the first quarter at 1.86%.  Thirty-year fixed rate mortgages are averaging at 3.75%, just where they started in January.

But February and March brought us much volatility with the 10-year inching as high as 2.21% and as low as 1.67%. The Dow Jones Industrial Average frequently moved up and down in 100-point plus moves as well. The main focus continues to involve speculation as to when the Fed will increase rates and what it will do to both the mortgage rate market and the real estate market.

Right now the markets are predicting a rate hike no earlier than September, but the Fed could move more quickly if we start to see strong data in the next couple of months. The good news as it relates to the real estate market is that prices remain firm and are moving higher and there is strength in the reported number of sales. Weather this winter has been frigid and too snowy for my tastes, yet we saw housing sales rise in the past two months in the Northeast.

Rates for the next few months will be heavily driven by economic data and global disruptions. Global events in the Middle East, slowing economic growth in China and the price of oil will also affect interest rates. But US treasuries are considered to be a global safe haven and rates can come down in spite of the turmoil. The big story remains the expected increases in rates by the Federal Reserve, however, and the only questions are when they will raise rates and by how much. Potential buyers are likely to benefit by locking in mortgage rates now rather than waiting.

More and more banks are coming in to the lending arena, especially new jumbo lenders which are key to the Hamptons. More competition will force lenders to sharpen their pencils in order to attract borrowers.  Banks are also easing some of their lending guidelines hoping to bring more borrowers to the table and therefore more buyers to the real estate market.

To sum it up, I see the glass as being half-full this spring.


Melissa Cohn has been an industry leader in the mortgage/brokerage business for over 3 decades. Visit her mortgage blog.

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