Last year (and until today) many people have enjoyed the low interest rates imposed by the government. Those who were planning to buy homes have availed interest rates that were at their lowest historically. The rates were below 5%. As of January 2010, bankrate.com showed that the rate slipped by 2% making the current 30-year fixed mortgage 5.13%. But the 15-year fixed mortgage remains at 4.54%; so as the adjustable rate mortgage.
All the figures mentioned above shows how affordable home buying has become for the people. Thanks to the government programs (the 300 billion dollar program to purchase long-term US treasury securities and the 1.25 trillion program which bought back mortgage backed securities or MBS). People still continue to enjoy low rates, even if it has reached the 5% mark. However, the question still remains. Will these low interest rates last?
From the looks of it, the interest rates would generally go up. There are many indicators that imply the possibility of rising mortgage interest. One of the main reasons is the expiry of the government programs. There is only one remaining and that is the buying back of MBS. The allotted funds for this program would then be depleted by March. After which, the Feds would start raising the interest rates.
If the feds start raising the interest rates, it will certainly have an effect to other financial institutions. The feds or the Federal Reserve is the central bank of United States. It is the benchmark of all financial institutions. Whatever activities they do, raising or lowering of prices, it will certainly make a big impact on the operations of the others.
There is also inflation. There is a possibility that the Fed would raise the rates after the program expires. What is happening right now is that there's more government spending rather than income. After the 1.25 trillion dollars will be used up, the government would have to raise the interest while they try to sell loans to foreign lenders. At least that what Bill Bonner, an author of various books about economy, thinks. He thinks the government would monetize the debt. Not to mention, people are still having a hard time paying back debts since unemployment rates are still at large.
Even in the latest survey conducted by Mortgage-X showed that various experts believe that interest rates would then increase within 90 days. For now, 55% believe that the rates would remain flat for 30 days.
So you see, it seems the government has temporarily run out of magic to stop the mortgage interest rates from rising. It is a long way before the real estate and the economy could recover. If they don't have any plan of action, the interest rates would definitely be hit by inflation. Hence, it just makes sense that people planning to buy a house should do it now. The rate has just reached the 5% mark. If you wait a little longer, you will probably end up expensive rates. Just take advantage of the low rates right now. All signs are showing that mortgage rates will soon increase. If you want to save, now is the best time to buy homes, get mortgage and lock down rates.
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