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In December 2009 rates move upward. We have been expecting this for some time now with the volatility in the bond market. Now even if rates move back down at the beginning of this year, there is something to be learned.

--Rates have been at historic lows from 2008 all through 2009.

Due to the Federal Reserve Board lowering short term rates and providing massive amounts of liquidity to the system in the face of the credit crisis. Remember the Fed controls short-term rates. Long-term rates such as rates on home loans are subject to the whims of the markets. As long as the economic news was bad, and it was for most of 2009, the markets stayed in line. Now as the news starts getting better, there is less of a need for the markets to stay in line, and a great chance of rate increases.

Remember, when rates are at historic lows, there is nowhere to go but up.

We are not saying the move we saw in the past few weeks represented a permanent turn in the market. (hopefully not) But eventually that turn will happen. Anyone who is planning a major purchase, from a car to a home, should take note of this fact and act accordingly. Rates are still great, but we don’t know for how long they will stay that way.