Mortgage Rates Forecasted to Rise
Based on a forecast of the Ten Year Treasury Bond Rate, there may be a corresponding rise in mortgage rates coming at a steady pace until the third quarter of 2011.
An economic forecast from the Mortgage Bankers Association (mbaa.org) dated August, 2009, shows economic data from 2008 to present, and forecast data through 2011.
One of the items listed in the report is the Ten Year Treasury Bond Rate, which has been commonly used as a barometer of mortgage interest rates.
Thirty year fixed mortgage rates tend to follow the ten year treasury rate, and current mortgage rates are usually set at 1.5 to 2% over the treasury note rate as compensation to lenders for the risk involved in mortgages.
Fannie Mae (fanniemae.com) also published an economic forecast dated August 2009, showing a trend of rate increases from the current quarter through the end of 2010, with an estimate of over 6% at that time.
If these forecasts hold true, we may see thirty year fixed mortgage rates increase to more than 6%. Rising mortgage rates are a cause for concern, especially in a struggling housing market. Mortgage applications could slow as demand drops for home buying and refinancing. Higher rates can potentially reduce the number of qualified mortgage borrowers, which can put pressure on home prices, and affect current homeowners with adjustable rate mortgages.
Considering the sources of the forecasts, the information would appear to be credible, since Fannie Mae is a government chartered organization, and the Mortgage Bankers Association is a national organization that represents the real estate finance industry.
A writer once said “Predictions are difficult, especially about the future”, but in light of this information, those who have been sitting on the fence waiting for mortgage rates to come down may want to reconsider their strategy.
Information on refinance mortgage, home equity rates, and Carlsbad new homes
