Today's Mortgage Rates Near Certain to Rise
The San Francisco Chronicle ran a report Monday, February 15, 2010, that contained bad news for those who think they should wait a while before buying a home or refinancing. Right now, America is enjoying something close to the lowest mortgage rates ever. But that is likely to change within months.
The Chronicle piece included interviews with five mortgage loan experts and economists, and every one of them predicted that rates will rise during 2010. Of the four who forecast a figure, one expected them to reach 5.5%, one thought 5.75%, one believed they'd get to 6%, and the last said that he was anticipating anything between 6% and 7%.
Lowest Mortgage Rates Make a Big Difference
Let's see what sort of difference a mortgage loan rate hike to 7% would make. Suppose you were to request a mortgage quote today for a $250,000, 30-year, fixed-rate mortgage at 5%. According to the shoprate.com mortgage calculator you'd pay $1,342.05 a month. Increase the rate to 7% for exactly the same home loan, and the monthly payment shoots up to $1,663.26. That's an additional $321.21 a month--every month.
But the figures are even more staggering if you see what difference that extra 2% makes over the lifetime of the mortgage loan. Instead of repaying $483,139 for a 5% loan, you'd have to pay a staggering $598,772. That's over $115,000 more.
Just imagine what you could do with that.
Real Estate Prices Another Factor
Of course, you may be tempted to hang on before buying a home because you expect residential real estate prices to drop even further. Perhaps you calculate that current mortgage rates will rise by only half a percent or so, and that that will be offset by those cheaper house prices.
Well, you could turn out to be right. Just yesterday, TransUnion, a company specializing in credit and information management, reported: "...mortgage loan delinquency (the ratio of borrowers 60 or more days past due) increased for the 12th straight quarter, hitting an all-time national average high of 6.89 percent for the fourth quarter of 2009."
And that's bound to have a depressing effect on house prices, isn't it?
House Prices Stabilizing?
Well, not necessarily as great an effect as you may think. FJ Guarrera, vice president of TransUnion's financial services business unit, pointed out:
It is good news that, while the median price of existing single family homes dropped almost seven percent between the third and fourth quarters of 2008, it dropped only 0.4 percent between the third and fourth quarters of 2009.
True, he went on to say that there was a long way to go before prices begin to rise nationally. But gambling on further substantial falls may prove unwise.
Mortgage Quote Now?
If you've been delaying buying a home or refinancing because you've been hoping for even lower mortgage loan rates and house prices, you may well conclude that things aren't going to get much better--and may well get worse--than they are now. If so, get a competitive mortgage quote today.