Mortgage rates expected to rise as government support phases out
Filed under: Banks, Real Estate, Mortgages
If you are fence sitting about whether to buy that house, you may not want to wait too much longer: If government officials can be believed, the more than year-long federal support of mortgages, which brought rates to post World War II lows, is slated to end within the next couple of months.Should this happen, mortgage rates are expected to climb. By how much, no one seems certain. Though fears are already being expressed by some, that any hefty increase in the 30-year fixed rate mortgage could cut any developing real estate market recovery off at the knees.
But forget the macro implications and let's keep to the micro ones: that would be you.
Right now, interest rates on 30-year fixed rate mortgages are around the 5% mark or slightly higher.
In case you have forgotten, or didn't know, that rate was as high as 6.04 % only back in the fall of 2008, before the government started buying up mortgage-related securities.
"We did what we thought was necessary to stabilize the market, but we don't think the government should continue special efforts forever," assistant U.S. Treasury secretary Michael Barr tells the Washington Post.
Now, as I said, not everyone thinks the feds will carry through with the plan to pull out of the mortgage securities market.
Even a few months ago, one credit advisory blog expressed skepticism: "Will the Fed stop buying mortgages and mortgage backed securities, come this April?" No, concludes the Bad Credit Advisor blog. " ...unless, of course, the Fed wants interest rates to rise, home values to fall and the economy to suffer even more."
But if you are seriously thinking about plunging into the home buying market, do you want to chance ending up on the wrong side of a bet? That by waiting a few more months, maybe rates will come down even more?
The only thing for sure is this: right now, mortgage rates are still very low by historical standards. If the skeptics are wrong and the government goes ahead and pulls the plug on its mortgage-rate initiative program this spring, many economists fully expect mortgage rates to rise.
If you have the job, the money, the credit line and the home of your dreams in sight, my question to you is: what are you waiting for?
Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour News Cycle." He has blogged about real estate matters for several years.
Reader Comments (Page 1 of 3)
2-01-2010 @ 11:59AM
Open Your Eyes said...
AMERICANS OPEN YOUR EYES!!!
OUR COUNTRY IS IN TROUBLE!!!
LEARN THE TRUTH ABOUT AMERICA!!!
www.AMERICAWAKEUPNOW.net
Reply
2-01-2010 @ 12:42PM
marc said...
What are we waiting for? How about houses to be priced to a percentage of income? When the median house in some areas can only be afforded by less than 10% of the population there something is wrong. They need to stop "rigging" the market with unqualified borrowers. I wondered how real estate prices could be rising in "blighted areas". That's because they were taking people off the street and giving them mortgages. That's why the prices kept rising, and now people still think these are realistic. They aren't, and if someone gets into a deal like that they will end up failing. We need real wealth here, not some nonsense that your 1000 sq foot shack is worth a million dollars. We need manufacturing here, repeal NAFTA passed by all the spendocRATS. Despite what President BJ said it's not good for america.
MARC
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2-02-2010 @ 6:28AM
Carroll Casey said...
Marc....
When my wife and I bought my first house roughly 40 years ago....the mortgage guide line was that the payment on the house payment had to equal 25% (or less) of your monthly income....boy..how things have changed...... Maybe that wasn't such a bad rule of thumb after all huh ??
2-02-2010 @ 9:19AM
redconvoy said...
They've already done that and you saw the results. I don't think the same mistake will be made again...at least I hope not. You could always bargain a house down. I've seen houses as much as $750,000 bargained down between $500,000 and $650,000. It's still a buyer's market.
2-02-2010 @ 9:53AM
Karen said...
Also,to add to your point,in answer to "what are we waiting for"?.How about ,in order for many people to BUY a house,they need to SELL the house they are in. We live in Vermont. I am recently retired and wanting to move a little further south where the home prices and cost of living is a lot less.Vermont is in the top 5 most expensive states to live in. I would LOVE to buy a home. In fact,we put down a refundable deposit on a lot in the Martinsburg,WV area last spring.Our house went on the market in June. We have lowered the price twice. We have two families who want to buy,but THEY have homes to sell also! A lot of this is also insecurity about one's job. Many people are afraid to obtain a mortgage if they are not sure about job security. I find it laughable that this writer thinks that anyone who is in the position of being able to just go out and buy a house,hasn't already done so! We would certainly be in WV right now if we could sell our house. In the meantime,after two extensions on our contract to build at the price we wanted,has finally xpired,and we are still waiting to sell our house.
2-01-2010 @ 3:52PM
Jacques said...
I don't think that house values are "suffering" insomuch as adjusting back to real values. And to help get housing appraisals to where they "should" be, then interest rates should also recover to what they "should" be, which is much higher than they currently are. In the meantime, some people might want to lock in a low-rate mortgage while they still can.
For those who don't trust the big banks: Meridian Credit Union - http://www.meridiancu.ca/
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2-02-2010 @ 1:58PM
OU812? said...
To Jacques:: you are 100% right. All the housing market is doing is correcting ITSELF..Values were rising much to quickly...It's like strectching a rubber band, it can only be stretched so far till it contracts or breaks..
2-01-2010 @ 8:23PM
sean murry said...
i live in a apartment i am glad not to have a house nowadays.
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2-02-2010 @ 12:51PM
lola said...
You live in an apartment right now.60 years from now you bet you will still be living bin an apartment.By the way who is paying your rent, you or section 8. Just asking
2-02-2010 @ 2:14PM
Red White & HUE said...
To LOLA::: Is that really YOUR name?? Hopefully NOT. But to rebut your comment. I live in an appartment on the Upper East Side Of Manhattan..Just because someone like YOU, with NO knowledge of housing trends in NYC or any other area for that matter, thinks that if ONE lives in an appartment they are section 8. I would venture to say that my yearly rent is more then someone like you makes in a year...I CHOOSE to live in an appartment, im not forced to live in one...I would also venture to say my appartment is bigger and worth more than what YOU live in...People like YOU, that are judgemental should look at themself first...Im guessing what you live in has more milage on it then your car does....BTW, nice name LOLA...Wasn't that song done by the KINK'S back in the day. "Well I'm not the world's most physical guy
But when she squeezed me tight she nearly broke my spine
Oh my Lola la-la-la-la Lola
Well I'm not dumb but I can't understand
Why she walked like a woman and talked like a man
Oh my Lola la-la-la-la Lola la-la-la-la Lola"
2-01-2010 @ 10:42PM
Dd said...
NAFTA ? GOOD FOR CORPORATE CEOS, GOOD FOR MEXICO & OTHER COUNTRYS. THE U.S.A ISNT 1 OF THEM.
REPEAL NAFTA & BRING JOBS BACK TO AMERICA !
DONT BUY A GM PRODUCT{ MADE IN MEXICO,} THEN MAYBE THEY WILL MAKE THEM HERE !
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2-01-2010 @ 11:41PM
csr said...
NAFTA is the only thing that is still keeping American Business in business. Our trade with Mexico and Canada is keeping all three countries alive.
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2-02-2010 @ 9:28AM
Rodney said...
I worked on my job as a welder for over 19 years with the same company,about 3 years ago the company started sending our jobs to mexico,where the pay is slave labor,2 1/2 years later the plant turned into a distribution center,about 90 percent of us lost our jobs,i have been unemployed for about 6 months now,there are no jobs out there,i feel because the jobs are being done in mexico and china,BRING OUR JOBS BACK TO THE USA!!!!!!!!
2-01-2010 @ 11:50PM
dave said...
All govt need to do is put a cap at 5% max for home loan and the market will keep going there No reason to go higher bank dont need to make 2 half time in pay back just cut the ceo and top 100 people pay and then there be billion to loan out for home
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2-02-2010 @ 5:18PM
Charles said...
Hey Dave, I was just wondering..... Is this really how to talk? From the looks of your last post, your pretty stupid!!! You should probably be on a leapfrog instead of on the internet discussing Home Mortgages.
2-02-2010 @ 10:40PM
Michael said...
Hey Dave,
You meant to say "You're pretty stupid, not your pretty stupid right?" When you make mistakes while making fun of people for making mistakes, you look pretty dumb!
2-02-2010 @ 2:35AM
carl said...
If they dont keep mortgage rates down or even lower...IT WILL BE IMPOSIBLE FOR THE ECONOMY TO RECOVER!!!!!!!!
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2-02-2010 @ 8:21AM
Brad said...
All of you are talking about the way things used to be priced. How about the fact that home repairs and remodeling have SKYROCKETED over the years.... you've had to take a second mortgage to put in a toilet. The insurances have risen, the taxes have risen. Are all the workers connected to the industry going to also take huges losses and work for far less money? If so, that will help keep home prices down. How many in the industry are willing to slash their prices in half?
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2-02-2010 @ 8:31AM
dan said...
as oduma says bush did it i had noting to do with it and just think we will hear that for 3 more years
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2-02-2010 @ 10:00AM
lauren said...
what are you waiting for? how about that crippled recovery you type of. a 5% mortgage is only great on a stable or appreciating asset. who cares if the money you lent to buy is cheaper than the money you could lend in the future if the thing you are buying isn't worth what it will be? a rising interest rate almost guarantees this. to whomever yahoo sourced this article out to, you've paired the right hypothesis with the wrong conclusion joker.
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