Rising Mortgage Rates

Samantha Peterson from Inman News wrote an article that considered the myths of rising home mortgage rates. Yes rates go up, but nobody can actually pinpoint the time when interest rates will rise or fall. Obviously when the Federal Reserve raises or lowers key rates we know there is a pretty good indication that rates will follow the Fed's pattern.

According to David Lereah, National Association of Realtors chief economist said in an article a few years back "In reality, home loan rates fell in the 1st quarter, shot up during the second quarter and then came back down," said. "The bottom line is interest rates for residential real estate have been lower than expected even though the economy appears to be on the way to another recession. When the economy improves and new jobs get filled, then we can expect mortgage rates to rise. These are all favorable factors to help the ailing housing sector."

The Federal Open Market Committee meets today and is expected to raise the federal funds target rate by .25%, bringing it to 1.5%. The federal funds target rate is the borrowing rate banks charge each other overnight. Fixed interest rates tend to align closely with the 10-year Treasury bond, which generally reflects what the market is expected to do longer term, as well as any anticipated changes in the federal funds target rate.

Economist Doug Duncan from the Mortgage Bankers Association said that he anticipates home loan rates between 6.5% and 6.75% by the end of the year. Duncan continued, "If economic growth slows significantly, rates will not reach that level but rather be between 6.25 and 6.5 %." He believes that the Federal Reserve will begin to hike key interest rates as inflation looms.