As the overall outlook for economic recovery continues to improve, mortgage rates are expected to experience a sustained increase. Despite the unrelenting effort by the federal government to artificially keep mortgage rates at or near historic lows for more than a year, the Federal Reserve has taken its proverbial foot off the gas in an attempt to allow the housing market to heal without government intervention. Coupled with improved unemployment figures and the ever-increasing government debt, interest rates will undoubtedly go up.
As the housing market continues to recover from unrelenting property value declines and unprecedented foreclosure activity, it appears mortgage rates are highly unlikely to go any lower than where they are currently at, leaving them with nowhere to go but up. According to last week’s figures, the average on a 30-year fixed-rate mortgage was 5.26 percent, which is still significantly lower than the 5.48 percent from April 2009.
The rate and term refinance boom that had been generated by the Obama administration’s Home Affordable Refinance Program (HARP) has effectively dried up. There is an extremely limited number of homeowners remaining that have not already refinanced, who could still qualify. As analysts predict a rise in mortgage rates – likely reaching 5.5 percent by August and 6 percent or higher by December – homeowners who may have missed their chance at refinancing can now expect higher monthly mortgage payments than they may have originally anticipated.
Prospective homeowners are in the same boat, but any procrastination will only compound their potential financial windfall as the $8,000 first-time home buyer tax credit and the $6,500 move-up home buyer tax credit will expire in just over two weeks if a purchase agreement is not signed with a seller by April 30.
Regrettably, too many Americans have become accustomed to the incredibly low mortgage rates from the past year or so, and believed that they would remain extremely low for a more prolonged period of time. The question is no longer whether mortgage rates will rise, but rather how much will they go up? All good things come to an end, so it’s just a matter of time before mortgage rates increase rather sharply.
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Debt Relief Options
October 8, 2010 @ 2:08 am
You have provided a good information and have discussed the topic from the perspective a common American. It was nice reading it.
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