What will happen to mortgage interest rates in 2010?
Obviously no one knows for certain, but based on a number of factors that we know today, most likely rates will slowly push higher in 2010.
Here's what we know:
The Federal Reserve has thus far purchased $1.137 trillion of MBS. (Mortgage Backed Securities). They promised to buy $1.25 trillion. This was a good decision I believe that the Fed made last year. The Fed started this program to drive down the interest rates. They successfully brought the rates from about 6.00% all the way down to the historic low of 4.75% for a 30 year fixed rate. However, they now have approximately another $113 billion of purchases left. A few months ago the Fed announced this program would end by the end of March of 2010. If there are no changes, that means the Fed will be purchasing about $11 billion of MBS for the next 10 weeks. If indeed they discontinue this program, once they are no longer buying, mortgage rates will begin to go up. Will they go back up to where they were prior to the Fed program? We will have to wait and see.
Another factor that may influence the interest rates to go up is inflation. The last couple of years inflation has been low due to the severe problems with the economy. However, inflation picked up a little towards the end of 2009. The Fed closely looks at the monthly Consumer Price Index (CPI). Last month that reading came in at a tame 0.1% rise. Year over year in 2009, the CPI number was 2.7%. Even tamer though was the Core CPI. This number takes out the volatile food and energy swings. That number for the entire 2009 was an even lower 1.8%. The Fed has a comfort level between 1-2%. If we start seeing some stronger inflation numbers in 2010, most likely this may mean the Fed will start raising the rates to fight inflation. So this may add some additional pressure for the rates to go higher later in the year.
One last area that could put pressure on the rates is the stock market. The Dow closed on Friday at 10,610. A number of economists are predicting the DOW will continue to rise. This is creating competition for fixed rate investments like MBS. Individuals and organizations have increased their comfort level for risk again. Instead of buying treasuries, bonds or Mortgage Backed Securities, the stock market seems to be a wiser choice for many right now. If the stock market continues to rise, there is less money buying fixed securities,which can cause the rates to go up.
How does this affect you?
Hopefully you have not been waiting to refinance your existing home. If you have, don't wait any longer. It seems to be just a matter of time before the rates begin to go up some.
If you are in the market to purchase your home, even if the rates were to rise a little, you will probably look back in a few years grateful for the low interest rate that you got and also thankful that you bought your place before property values begin their next bull run.
Here is a little quote I hope you find encouraging: "Control what you can control and forget the rest!"
Remember, we can control ourselves, our behaviors and our activities. The outcome of events is out of our control.
Till next time, have an amazing week!
John Santorineos
Get your Free Interest Rate Quote Now!
Here's what we know:
The Federal Reserve has thus far purchased $1.137 trillion of MBS. (Mortgage Backed Securities). They promised to buy $1.25 trillion. This was a good decision I believe that the Fed made last year. The Fed started this program to drive down the interest rates. They successfully brought the rates from about 6.00% all the way down to the historic low of 4.75% for a 30 year fixed rate. However, they now have approximately another $113 billion of purchases left. A few months ago the Fed announced this program would end by the end of March of 2010. If there are no changes, that means the Fed will be purchasing about $11 billion of MBS for the next 10 weeks. If indeed they discontinue this program, once they are no longer buying, mortgage rates will begin to go up. Will they go back up to where they were prior to the Fed program? We will have to wait and see.
Another factor that may influence the interest rates to go up is inflation. The last couple of years inflation has been low due to the severe problems with the economy. However, inflation picked up a little towards the end of 2009. The Fed closely looks at the monthly Consumer Price Index (CPI). Last month that reading came in at a tame 0.1% rise. Year over year in 2009, the CPI number was 2.7%. Even tamer though was the Core CPI. This number takes out the volatile food and energy swings. That number for the entire 2009 was an even lower 1.8%. The Fed has a comfort level between 1-2%. If we start seeing some stronger inflation numbers in 2010, most likely this may mean the Fed will start raising the rates to fight inflation. So this may add some additional pressure for the rates to go higher later in the year.
One last area that could put pressure on the rates is the stock market. The Dow closed on Friday at 10,610. A number of economists are predicting the DOW will continue to rise. This is creating competition for fixed rate investments like MBS. Individuals and organizations have increased their comfort level for risk again. Instead of buying treasuries, bonds or Mortgage Backed Securities, the stock market seems to be a wiser choice for many right now. If the stock market continues to rise, there is less money buying fixed securities,which can cause the rates to go up.
How does this affect you?
Hopefully you have not been waiting to refinance your existing home. If you have, don't wait any longer. It seems to be just a matter of time before the rates begin to go up some.
If you are in the market to purchase your home, even if the rates were to rise a little, you will probably look back in a few years grateful for the low interest rate that you got and also thankful that you bought your place before property values begin their next bull run.
Here is a little quote I hope you find encouraging: "Control what you can control and forget the rest!"
Remember, we can control ourselves, our behaviors and our activities. The outcome of events is out of our control.
Till next time, have an amazing week!
John Santorineos
Remember, whether you are buying or refinancing, our licensed professionals at www.AboutHomeMortgages.com want to assist you with securing your next mortgage.
Get your Free Interest Rate Quote Now!
Posted by John's Blog at 1/18/2010 3:07 PM 
Categories: First time buyer, Refinance, Real Estate
Tags: mortgages refinancing interest rates mortgage refi buying a home
Categories: First time buyer, Refinance, Real Estate
Tags: mortgages refinancing interest rates mortgage refi buying a home
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