Mortgage rates have been at historic lows for some time now. But with every good thing, there is usually an end. With recent “whispers” from the feds, it looks like the low rates might be one of those good things coming to an end.
Ben Bernanke recently announced that the interest rates on short-term bank loans would be the only ones that are raised. However, many experts think this stipulation is going to indirectly raise the interest rates on mortgages which have been so low mainly because of the government’s bailout of companies like Fannie Mae and Freddie Mac.
According to the analysts at the Mortgage Banker’s Association (MBA), the mortgage rates are likely to go up by about a half of a percentage point by the beginning of June. Much of the reason for the speculation is because the feds plan to stop buying mortgage backed securities in the next month or so, which will indirectly lead to higher mortgage rates for borrowers.
After the feds stop buying these securities, it will be up to private investors to buy those securities. Unfortunately, they have not been stepping up to the proverbial plate in order to make that happen. And who can blame them? Bad mortgages were one of the major reasons for the economic distress in the last couple years. Why would private investors want to take a chance in losing their investments by backing mortgages that would cost them thousands or even millions of dollars?
As of today, the mortgage interest rates are remaining steady at about 4.93 percent. That number is according to Freddie Mac. That is nearly a 0.25 percent drop from the average mortgage rates for a 30-year-fixed rate mortgage. For a 15-year fixed-rate mortgage, the current rate is even lower at 4.53 percent. That number, however is up from last week’s calculations of about 4.43 percent.
According to the Motley Fool’s blog, however, the mortgage industry is a complex system that tends to balance itself out so there should be little worry about rising interest rates. However, if things get bad (interest rates above 7 percent), the feds may step back in with some other program to help bring rates back down.
If you haven’t taken advantage of the low mortgage rates yet – either through getting a new home or refinancing your current one – you should take your chance now. This is the best time to do it while lenders are still giving low rates. Don’t wait for the rates to get even lower than they are right now because they probably won’t!