Charleston mortgage rate outlook [Higher]
Mortgage rates have been nothing short of unbelievable lately, solidly under 5% and that means a lot to home affordability. But there are several reasons that rates will be higher in the near future.
The first reason is that the economy has been strengthening and rates on the 10 year US Treasury have been increasing. And while mortgage rates are not pegged to the 10 year T bill (or the prime rate), there has always been a close correlation between the two. Mortgage rates are based on the prices paid for mortgage backed securities and that brings up reason number two because we know that the Federal Reserve has been buying mortgage backed securities for the past year in an effort to keep mortgage rates low in order to help stimulate demand in the housing sector. But that support is scheduled to end sometime in the early part of 2010.
Bill at Calculated Risk recently analyzed what mortgage rates should have been if the Fed wasn't buying mortgage backed securities and concludes that mortgage rates will rise between 30 and 50 basis points when the Fed ends their purchases or in other words, the rate will be somewhere between 5.17 percent and 5.37 percent. And you should also note that 10 year Treasuries ended the week higher at 3.54 percent.
If you were a real estate agent, you would probably love the title of this article by Mark Roth at Business Week, If You Don't Buy a House Now, You're Stupid or Broke.
So please don't shoot the messenger, those are his words, not mine, and while there are many good reasons to buy a home, there are also good reasons to not buy a home.
But he is talking about historically low interest rates that are available today and the article is certainly worth a read to get some perspective on where interest rates have been and where they are headed.