When Will Mortgage Rates Finally Rise?

With so many people sitting back and waiting to see what is going to happen in the housing and mortgage markets, it is now clear that the summer season is not turning out like it normally would. While summer is a time to move when children are out of school, this year’s season did very little to stimulate the market. With the current record low mortgage rates, everyone is trying to predict when mortgage rates will finally rise.

Earlier this year, the Feds had planned to pull back some of their emergency decisions that were made during the financial crisis. At that time, they were preparing to begin raising interest rates in the spring in order to keep the economy growing. During the first quarter of this year, mortgage rates dropped because mortgage loans could be packaged and sold to Fannie Mae and Freddie Mac who then sold them to the Feds. It was at that time that many people refinanced their mortgages not knowing if the lower mortgage rates would continue. With the global crisis continuing after March and into the spring season, mortgage rates continued to stay down to a reasonable level.

Now, fears over the possibility of a double dip recession has prompted the Feds to make their latest move. In an effort to support economic growth, the Feds have said that they will use the payments received from the Fannie Mae and Freddie Mac debts and mortgage backed securities to purchase long term U.S. Treasury securities. By buying long term government bonds, the Feds are trying to move interest rates on mortgages and corporate loans even lower in an effort to help the economy grow at a quicker pace. As yields on Fannie Mae and Freddie Mac mortgage securities guide the U.S. mortgage rates, it is a possibility that mortgage rates will go even lower with the goal of increasing bank lending.

Unfortunately, until the unemployment rate moves lower and consumer spending moves higher, the economy is destined to be at a standstill. While the financial system has money to lend, the standards have become so strict, banks are unable to find acceptable loans to close. Money is just not flowing the way that is necessary to spur the economy. Unemployment is keeping many people out of the mortgage arena while underwater home owners are finding it impossible to refinance.

For right now, anyone and everyone who can take advantage of the lower mortgage rates should do so while they are here. Given the latest Fed announcement and their continued involvement in trying to grow the economy, mortgage rates may continue to stay low. But as everyone knows, this can change overnight and no one will want to be caught sitting on the sidelines wondering when will mortgage rates finally rise. There is a great opportunity out there right now that may not be there in the near future.