Monthly Archives: February 2013

Mortgage Rates Are Rising Fast – Act Now

Mortgage rates are rising quickly this year –  that’s right, up nearly 15%.  Mortgage refinancing would be a good idea right now before it is too late.

The average for a 30-year, fixed-rate mortgage pushed above 3.7% in more than three months.  Perhaps the all-time low is behind us.  That was set in November when 3.31% was the average for a 30-year, fixed rate loan.  For the rest of the year, expect rates to gradually move higher, ending the year at about 3.75% and then moving above 4% sometime next year.  There’s no point to wait for lower rates if someone is considering refinancing their home.

Rising rates will affect homeowners looking to refinance more than they will affect home purchasers.  That’s because refinancing is mainly an interest-rate-driven decision, while home purchases have more to do with jobs and lifestyle changes. Even though they’re up, rates are still near historic lows.  Along with an improving economy, rates have edged up, given less demand for safe haven investments such as bonds since Congress partly averted the so-called fiscal cliff of tax increases and spending cuts.

Mortgage interest rates may dip below current levels on occasion, expect them to hover between 3.5% and 4% for most of this year.  That assumes no big economic shocks to the U.S. economy.  Except for a few weeks, mortgage rates have been below 4% for the past 14 months.  The low rates have helped the housing market, which is showing signs of strengthening. Home prices were up 5.5% in November year-over-year.  New and existing home sales are also up.  That also is helping the overall economy.

If the economy is getting better, slightly higher interest rates are a natural occurrence.  But there’s no reason to believe that rates are headed upward in a straight line.  But a slow-growing economy will work to keep a lid on them. The U.S. economy is forecast to grow just 2% this year, and it actually shrank at an annual rate of 0.1% in the fourth quarter of last year.  The Federal Reserve has also said that it plans to continue buying $40 billion a month in mortgage-backed securities. Its high-volume purchases bring down yields on those securities, which influence mortgage rates.