Mortgage Rate Forecast For July

The mortgage rate forecast for July could get very cloudy for the second part of the month.  It is likely that we will continue to see mortgage rates work sideways until the 10 year treasury rate hits support around 3.4%.  One support is tested, we will then know where overall interest rates are going to go.  If we see a breakdown of support and the 10 year starts heading towards 3% then it is likely that mortgage rates will test the all time lows that we saw back in March.

If the 10 year hits support and bounces higher, we could see it head all the way back up to 4% which would mean rates would head towards 6%.  It is going to be very interesting to see what happens over the first few weeks in July.  After a long, holiday week, it will be fun to see what rates do on Monday morning.  Making a forecast of what will happen is very hard because we do not know what actions the government is going to take.

If the government decides that they want to auction off several more billions in bonds, then it is likely we will see a breakdown below support.  If that is not the case and the government sits on the sidelines for a few weeks, look for the 10 year to continue the uptrend it started at the beginning of 2009.  If the uptrend does continue, it is very possible that we could see mortgage rates in excess of 6%.  This is now what the government wants as home prices have already decline enough as it is.  There are several major metropolitan cities that have seen over 50% declines since the housing market top in July of 2006.