Interest rates on the rise?

In the last two weeks, we have seen interest rates start moving upward.  Many people will say it had to do with very light volume in the market due to the holidays  and that can really show volatility in the market.  However, we have also been hearing for several weeks that rates will start to increase in 2010. 

The Federal Reserve Board lowered short term rates and have provided billions of dollars to keep interest rates artificially low to stimulate the economy.   The Fed has said that they will stop buying mortgage backed securities March 31, 2010.  The Fed will have spent about $1.25 trillion  by the end of March to keep rates low.  With that ending, we expect rates will increase over the next few months. 

Some mortgage investors are saying that the December sell-off in the mortgage markets pushed rates too high and they feel rates will drop back down.  Others are looking at this Friday's nonfarm payroll report for December and expecting it to show the first month of job growth since December 2007.  That is cause for rates to increase as it will show the economy is re-bounding.

The biggest concern for homebuyers is that as interest rates rise, some buyers will be priced out of some homes.  The difference between 5 and 6% on a $200,000 mortgage is just over $100/month.   That will make a big difference in what you can afford in a new home.

No one knows for sure what will happen.  My best "educated" guess is that rates will start to increase and I wouldn't be surprised to see us back up near 6% by the end of 2010 – and I may be totally wrong!!!  However, if you are looking at refinancing or buying a new home, I would tell you to expect that rates are going to have a better chance of increasing than decreasing!  If you are concerned about payments and what you can afford, this is a terrific time to buy as home prices are still low (but starting to increase) and rates are still fantastic. 

Leslie Vanderwerf, Advisors Mortgage - EmailWebsite

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

Related Posts

What Every Homebuyer Should Know About Closing Costs

🖨 Print Article Before making the decision to buy a home, it’s important to plan for all the costs you’ll be responsible for. While you’re busy saving for the down payment, don’t...

Transite Heat: is this a problem?

🖨 Print Article If you mention the word transite to about 90% of the population, they either think of HVAC ductwork installed below the concrete floor in a basement, or they...

Subscribe to Our Newsletter for Market Updates & Mid-Century Modern Listings

Our weekly HomesMSP Update includes current local market information and a curated list of mid-century modern properties for sale, plus posts from an inspector, a lender, a stager, info about neighborhoods, life in the Twin Cities… even recipes!

Hidden

Blog Categories

Archives

Sharon and John Hensrud

About Us

The HomesMSP Team is committed to meeting you where you are and listening… really listening to understand you so we can use our extensive knowledge of the market and local neighborhoods to give you personalized service.