Higher mortgage rates likely on the horizon
If Paul Revere were alive today, he’d be shouting from his saddle (OK, maybe he’d Twitter from his Lazy Boy), “Higher interest rates are coming. Higher interest rates are coming.”
For much of 2009 the Federal Reserve has been buying mortgage-backed securities to the tune of more than $1 trillion. This aggressive buying program has helped keep mortgage interest rates hovering around 5 percent for 30-year money.
The Fed has set aside another $163 billion for purchases between now and the end of March. This pace of purchases is substantially less than earlier in the year. Once March 30, 2010 arrives, the buying by the Fed is scheduled to stop.
Everything I’ve been reading says to expect rates to start creeping up after the first of the year. Many experts are predicting 30-year mortgage rates of about 6 percent by April.
What does that mean to you as a home purchaser? Say you are buying a $300,000 home with 20 percent down. Monthly principal and interest at 4.875 percent on a 30 year mortgage is $1,270.10. That same loan at 6 percent will cost $1,438.92 per month.
Looking at it from a different angle, that $168 per month savings actually increases your buying power by almost $32,000.
So, the big question is, “what are you waiting for?”
Inventory of available homes is good and Uncle Sam is willing to chip in tax credits of $6,500 to $8,000. Housing prices are down but appear to be stabilizing and interest rates are incredibly low with most predicting an increase on the horizon. I’d say now is the time to buy that new home.
Posted by:
Steve Bauman
Leave a Comment