Home > 2015 > Mortgages

The Santa Bubble: Why Mortgage Rates Are Up Right Now

Advertiser Disclosure Comments 0 Comments

Every December there’s a market phenomenon that sends interest rates higher by about 0.25% across the board, and it can make buying a home at this time less than joyous when buyers realize they’re going to be paying more for their loan than they would have earlier in the year. I call it the “Santa Bubble” and here’s how it works.

Beginning each year around Dec. 5 and lasting through mid-January, mortgage rates typically increase due to heavy bond market activity. At the same time, consumer confidence is up, retail sales are strong and financial professionals are re-balancing their client portfolios, moving money around and completing trades at a fast-and-furious pace in the last weeks of the calendar year.

Other scenarios that may influence the annual Santa Bubble include the following:

  • Companies and individuals that had a capital loss may be influenced to make a year-end money move to reduce their exposure to tax liability. Such events can further cause monies to flow out of the bond market, Rising bond market yields generate and support low mortgage rates In order to drive such activity, the money usually comes at the cost of selling stock, meaning people are moving monies out of individual equities and into the bond market. This is precisely why mortgage lenders closely watch the fixed-income market likes hawks, in particular, the daily trading of Fannie Mae mortgage bonds. Any trend directions signal mortgage pricing changes, which in turn affect the rates borrowers pay on home loans.
  • Bond traders are paid to move money in order to best optimize returns for their clients. Make no mistake: bond traders are paid based on the movement of money, whether it results in a gain or loss, either way they are still compensated.

What It Means for Homebuyers

With all of this in mind, does it really make sense to lock in a mortgage rate during the holiday season? It really depends on your deadline for wrapping up your transaction. If you’re buying a home, you may be under contract and be pressed to perform on a contract which means accepting a market rate. Granted, you could always refinance the loan in the future, but in situations where push comes to shove, you may just have to make a decision. A skilled and experienced mortgage professional should be able to show you rate and pricing scenarios so you can best determine what makes the most financial sense for you during your loan application process.

What It Means for Refinancers

Borrowers who are refinancing have a little bit of a different sense of urgency. If a refinance can lower your interest rate or shorten your term and allow you to save money while continuing to chip away at the loan, even if it’s in the holiday season, it still could prove to pencil. Alternatively, you can always apply with a mortgage company and float your interest rate. This can be an ideal situation if you’re waiting for a certain interest rate and/or payment to be within your grasp in relationship to what you’re trying to accomplish.

Whether you’re buying a home or refinancing, a good credit score will help you qualify for better interest rates. You can check your credit scores for free on Credit.com to see where you stand.

More on Mortgages & Homebuying:

Image: Photodisc

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team