Interest rates have been fantastic this year! No one really expected that we would see 30 year fixed rates in the 4.5-5% range for this long. This week Fed Chairman Bernanke spoke to the Joint Economic Committee of Congress. He said that central bankers believe that the housing market may be approaching the bottom of its three year slide based on tentative signs of a rebound in consumer spending.
Part of the reason the interest rates have been so low is that the Fed has been an aggressive buyer of mortgage backed securities this year. Earlier this year the Fed had about $1.25 trillion dollars to use to purchase mortgage backed securities to keep mortgage interest rates lower. As of last week, the Fed had spent $404 billion of their available capital. Once the Fed spends about half of the money they have available, their ability to keep mortgage rates low will begin to fade. They have been spending about $100 billion a month. At this rate, we will see that money disappear by the end of the year.
What this means to homebuyers is that we can expect rates to move slowly up to levels at 6.0% and higher towards the end of the year. It is almost impossible to speculate on where exactly rates will be as there are so many unknown variables, but we do know that rates are very low and won't stay here forever!
If you are thinking about buying, between low prices and low rates, it is a great time to buy. The longer you wait, the higher the chance that rates may be higher and home prices may also be higher.
Leslie Vanderwerf, Advisors Mortgage - lvanderwerf@advisorsmtg.com – Website
