Higher mortgage interest rates go hand in hand with a growing economy. Even though rates are still hovering at historic lows, the home buyer should expect rates to begin climbing soon. Lawrence Yun, Chief Economist of the National Association of Realtors, believes that the 30 year fixed rates "may rise to 6 percent by December and to about 6.5 percent at the end of 2011."
As the Federal Reserve backs away from purchasing mortgage-backed securities, some consumers may think that action will directly lead to higher interest rates. However, it seems that more predictable economic factors are the likely reasons rates will begin to climb. Those macro-economic factors include the continuing high U.S. budget deficit and the recovering economy. Obviously, if the government can devise a plan to reduce its deficit over the long term, then rates may continue to hover around 5 percent. If not, then as the economy continues to grow it will push up the demand for credit and that will lead to raising rates.
In the meantime, mortgage interest rates will rise modestly, but such an increase comes directly from a growing economy. According to Mr. Yun, "that's a welcome sign"
If you have any questions concerning rates and the affect on your home sale or purchase, please call Team Stein at Keller Williams 310-774-3838 or on the web at James@TeamStein.com or Elizabeth@TeamStein.com