Mortgage rates climbed by 1 percent in 2013, but they are still unusually low. Thirty-year mortgage rates ended November at 4.29 percent, but averaged 8.57 percent since the early 1970s. Three key influences on the interest rates:
1.Consumer demand: The consumers will determine. A stronger consumer means more demand for capital, which translates to higher interest rates.
2.Inflation: Inflation has averaged 4.13 percent a year over the past 50 years. As long as inflation remains under control interest rates will stay below their historical norms.
3.Federal Reserve Policy: The Fed influences short-term interest rates through its control of the federal funds rate. It has taken the additional step of influencing long-term rates by making regular purchases of Treasury and mortgage-backed bonds.
If the above scenario plays out consumers can expect to the three different types of rates:
1.Deposit rates: Banks have little incentive to raise deposit rates. Keep an eye on long-term CD rates. If you can find one with mild early withdrawal penalties.
2.Mortgage rates: 15-year mortgages might become increasingly attractive if 30-year rates continue to climb faster than shorter-term mortgage rates.
3.Credit card rates: Credit card rates are likely to rise less than other interest rates. There is a logic to their muted reaction to the interest rate cycle.
Mortgage rates climbed by 1 percent in 2013, but they are still unusually low. Thirty-year mortgage rates ended November at 4.29 percent, but averaged 8.57 percent since the early 1970s. Three key influences on the interest rates:
1.Consumer demand: The consumers will determine. A stronger consumer means more demand for capital, which translates to higher interest rates.
2.Inflation: Inflation has averaged 4.13 percent a year over the past 50 years. As long as inflation remains under control interest rates will stay below their historical norms.
3.Federal Reserve Policy: The Fed influences short-term interest rates through its control of the federal funds rate. It has taken the additional step of influencing long-term rates by making regular purchases of Treasury and mortgage-backed bonds.
If the above scenario plays out consumers can expect to the three different types of rates:
1.Deposit rates: Banks have little incentive to raise deposit rates. Keep an eye on long-term CD rates. If you can find one with mild early withdrawal penalties.
2.Mortgage rates: 15-year mortgages might become increasingly attractive if 30-year rates continue to climb faster than shorter-term mortgage rates.
3.Credit card rates: Credit card rates are likely to rise less than other interest rates. There is a logic to their muted reaction to the interest rate cycle.
Richard Barrington. December 9, 2013. MoneyRates.com. 2014 Interest Rate Forecast. Retrieved from the Web.
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