Rates Are Going Up! How Much?

July 25th, 2011


Today’s blog is about interest rates.

So, I’m going to go ahead and go on record and say that interest rates are going up in the next two to four weeks, about one half of one percent, directly due to the federal government’s inability to contain spending, to pass a reasonable debt ceiling tied to some sort of spending constraints and I believe we’re also going to get a debt downgrade, even if they come through with a debt ceiling bill that passes and we extend the government’s credit card. The rating agencies, the cat’s out of the bag. It’s too late. They know that we can’t contain spending. They know that whatever we’re going to suggest we cut out of the budget is going to be backloaded in later years and it’s just a drop in the bucket. If the federal government can’t get our spending under control, the markets are going to do it for us through lack of trust in our debt issue and higher interest rates.

So, a lot of people are making a lot of speculation about interest rates. I’m going to go ahead and go on record and say low interest rates, at least rock bottom interest rates, are over. Interest rates will be up a half percent by the end of August and beyond that, I think they’re going to go higher. I don’t think that they’re going to spike. I don’t think that they’re going to get out of control.

Japan is a good analogy. If you look at Japan several decades ago when they imploded and there was faith lost in their debt markets and they had a bloated deficit and everybody thought that their interest rates would skyrocket and people would stop lending to them, but Japan is not Greece. The United States is not Greece. We have a better ability to earn and grow our way out of this. I don’t know that we’re going to; we just have a better ability to. People have more faith in the United States. People had more faith in Japan. Their interest rates rose when their economy tanked and of course their economy has stayed in a tank for almost two decades. But their interest rates didn’t skyrocket.

So there are some alarmists who think that interest rates are going to spike and really skyrocket, not unlike Greece, maybe what’s happening in Italy. I don’t think that’s going to happen, but right now, when you can get a 30-year fixed interest rate that two weeks ago was 4.375% if you were borrowing up to $417,000 that today is 4.625%, I believe at the end of August it’s going to be 5.125% or maybe 5.25% give or take.

There it is. I’m on record. Feel free to play this back many times and let’s see if I’m right and if it comes through.


Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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