Well rates broke out of their slumber these last couple of weeks. As you can see from the chart we are pushing back to the 7% level again. I don’t think it’s a coincidence that rates started to rise when talk of the debt ceiling started to make headlines. So briefly, for those that don’t know, let’s talk about the debt ceiling. The government has a self-imposed limit on how much it can spend, when it gets over that limit congress has to raise this limit or risk not paying it’s debt. The US has never defaulted on the debt, mainly because there would be chaos. Remember there is nothing backing money except for the full faith in the US government paying its debts. If the US ever decided to stop paying it’s debts then it would be the biggest financial apocalypse since the great depression. So when’s the deadline for said start of the apocalypse? Well according to the government it’s June 1^st which is less than a fortnight away (a fortnight is two weeks, I should’ve just said that but how often do you get to use fortnight in a sentence?).

All that to say it is highly highly unlikely that this will happen. Though the fact that there is a non-zero chance that this could occur is my guess as to why rates have been increasing. Which makes sense, if you were loaning out money and someone said to you ‘I may or may not decide to pay you back’ you would probably charge a bit higher of an interest rate too.

Where do we go from here? Until the debt ceiling gets resolved rates probably aren’t going to see much relief. There is also a fed meeting on June 10^th which will be of particular interest as the market isn’t sure if they will raise rates again. My money is they will pause the rate hikes from here but if the jobs report comes in higher than expected then there might be another hike in the future. One last thing, it is important to keep these fluctuations in perspective. Here is a chart of mortgage rates since the beginning of September. Except for a couple of weeks rates have been bouncing between 6%-7% so this is still in the normal range we have been seeing for the last 7-8 months. I am a bit surprised that we are close to 7% rates again but I think once the debt ceiling issue gets resolved we will see some positive movement in rates.