Ed Torrez--Prediction |
Borrowers who didn’t take advantage of the historically low
interest rates likely have missed the opportunity to purchase or refinance
using an ultra-low mortgage rate. In the past month, rates have been on the
rise and are expected to continue to climb. Fannie Mae’s chief economist
doesn’t believe mortgage rates will ever be that low again.
Making sense for my readers:
Making sense for my readers:
- According to the economist, the Fed is going
to stop bolstering the housing market, which has kept rates at rock-bottom
levels by buying up to $85 billion a month of Treasury bonds and
mortgage-backed securities. That has enabled lenders to sell mortgage
loans at low interest rates and recoup their money immediately – plus
profits.
- If the Fed stops purchasing the securities,
private investors will have to pick up the slack. For investors to do
that, the loans will have to offer a better payoff, and that would mean
raising rates for borrowers.
- Low mortgage rates generally are a result of
an economy in distress. But now, the market believes the economy is
getting stronger. Job gains have picked up, and the fact that that hiring
is advancing rather than retreating is good news for the economy. Any
positive future reports are expected to push rates higher.
- Today’s rates are unprecedented. The
ever-popular 30-year, fixed-rate mortgage hit a 37-year low in 2003 at
5.23 percent. It is likely that any return to normal conditions will be
accompanied by higher mortgage rates.
- Borrowers should keep in mind that even if rates go up a percentage point or two, mortgages will still be relatively low. Historically, 30-year loans are usually 5.5 percent or higher. For clues in the direction of mortgage rates, experts recommend borrowers look at the daily movements in 10-year Treasury bond yields. Mortgage rates track Treasury yields with the difference between them holding fairly constant.
(Source:
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