The rise of interest rates for the historic lows we are now experiencing is inevitable. It appears that it will be sooner than later too. At the end of March the Fed is scheduled to quit purchasing mortgage bonds. Right now they are purchasing about 4/5's of the bonds on the market. the fed has been most generous in keeping these rates low. When the market begins to depend on the private investors to purchase these bonds theywill of necessity be at a higher rate because the private investors will not be a tolerant of the risk involved like the Fed has. Most experts are predicting that interest rates on home loans will go up by 50 basis points (.5%) within the first week after the Fed quits buying the bonds. They also see interest rates going up by more than 1% by the end of 2010. What this will do to home sales is uncertain because buyers are more attuned to home prices that they are interest rates. That being said; higher interest rates will at the very least limit the size/price of the home that a consumer will be able to qualify for.
If buyers are seting on the fence waiting for interest rates to go down, now is the time to help them off. They could miss a great opportunity to purchase the home of their dreams.
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