Best Mortgage Rates Behind Us?
Predicting how current mortgage rates will move in the future is a mug's game, not least because there's absolutely no certainty in the markets that determine them. But most informed observers believe that the best mortgage rates of 2009--which were also the best mortgage rates for 50 years--are unlikely to return for a very long time. Maybe, indeed, for another half-century.
The consensus--if such a thing can exist between these extremely opinionated people--among those informed observers is that mortgage loan rates will edge up very gently over the next two or three years, rising to (using the Mortgage Bankers Association's figure as a not unrepresentative example) perhaps 6.6% for a 30-year, fixed-rate mortgage (FRM) by the end of 2012.
According to Freddie Mac, the rate for that 30-year FRM averaged 5.06 percent during week ending April 29, which gives you some idea of the extent and pace of the changes that most experts anticipate.
Herds of Economists Sweeping Majestically Across the Serengeti Plain
In spite of their reputation for always disagreeing, economists are usually herd animals. Remember how few voices were raised in warning before the credit crunch?
Well, a few voices are now being raised in warning about mortgages. The question is: Are those doing the raising being amazingly prescient, like the credit crunch bunch, or are they rogue, blue-sky thinkers who've just got carried away? And the answer (yes, it's a question, too) is: Who knows?
Insightful or Inciting Panic?
So just what are the warnings that you should--or should not--be heeding? Well, here are two from a single BusinessWeek feature on May 4, 2010:
- Investors buying Fannie Mae and Freddie Mac mortgage bonds are demanding higher yields. The spread (difference) between these securities and Treasury ones is the widest for five months, and is going up.
- Barclays Capital Index says that interest rate volatility (which has been low) is suddenly rebounding, spooking those who invest in mortgages and putting further upward pressure on rates.
And here's a third from that same feature. It's a quote from Walt Schmidt, who works for FTN Financial Capital Markets in Chicago as a mortgage-bond strategist:
"You hate to assign everything to Greece, but any time you get sovereign-debt risk issues, I think that gives MBS [mortgage-backed securities] investors pause. It's not that far-fetched to think that if multiple countries default, there's a chance Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac eventually could too."
Mortgages and Peace of Mind
If you're risk-averse, you may find some of the above unsettling. But there is, of course, an easy way to acquire a Zen-like attitude to mortgage interest rates. And that's to buy or refinance now. Because there's still time to sign up to something close to the lowest mortgage rates in recent history.
Get quotes from some of the best mortgage lenders here.