How does an increase in mortgage volume correlate to interest rates? Read Below..

How does an increase in mortgage volume correlate to interest rates?

Traditionally, the more demand you have for any product, including money, the higher the price.  Therefore rates should increase but haven’t.

 

However know that the Federal Reserve has said that they would keep Fed rates low to Banks through 2014,  So interest rates should stay low through then.However the last 35+ years of watching rates and being able to predict went out the window, with the Fed. Reserve intervening the last few years.

 

We’re already planning for 2013, and what might happen if rates stay at these levels, or go up a point- plus if/when Fannie and Freddie exit?   This is just one opinion, but I would say that it doesn’t correlate – at least directly. When rates were much higher, like 6 or 10 or 18%, we could count on every drop of .5% resulting in a “refinance boom.”

And I still think should rates go up1/2 point or so, we will see the historical stop and huge demand we have seen in the past when rates go up.

 

But overall mortgage volume relates to a number of factors, rates being only one of them. General economic conditions and ease of credit jump to mind, as well as the overall population growth and recent mortgage production levels. In addition, the reason why rates go up will influence volumes. If rates go up because of the loss of Fannie & Freddie, that has one impact. But if rates go up because the economy is heating up, that would have a different impact. That is a short answer to a relatively complex question, and if you’d like to delve into the historical numbers a good place to start is Freddie’s statisticspage. And good luck with planning out rates, manpower, and volumes for 2013 -remember that past performance is no indicator of future gains or losses.

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