Interest Rate will Go up possible to 7%,
Mortgage Rate are being held down by federal government to help stimulate the market, the government was active in purchase of mortgage-backed-securities over the year.
The goal was to control the interest rate, so home buyers can qualify for a mortgage but to end December 31, 2009 which will extend unit march 2010. So the private sector have to step up and provide mortgage , the government was comfortable lending 5% but the private sector will not see that as attractive.
•· National debt rising dramatically
•· Inflation looming down
•· Doesn't make good business sense to lend money for thirty year at five percent.
** New York Times just this past week said this about this issue:
"One of those things propping up the market has been the Federal Reserve, which has been buying mortgage-backed securities to keep interest rates low. As the Fed begins to wind down its purchases in the next few months, rates will become less enticing. Analysts expect them to rise to at least 6 percent from the current 5 percent."
If interest rate go up even by one percentage point, to six percent, as the New York Times suggests analysts are predicting, that will raise the cost of purchasing a home.
Some buyers are sitting on the fence right now, concerned that prices still might fall.In reality, even if prices fall another ten percent, if interest rates rise one percent, the buyer's monthly mortgage payment will actually be higher.
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