Mortgage rates are now on the rise again as was the case six months ago. The difference this time is that average rates on a 30 year mortgage have jumped 25 basis points to 3.99% as compared to a 10 basis point increase to 3.52% in December (source: Bankrate weekly surveys). In addition, the market appears to have moved in response to the Federal Reserve Chairman’s recent comments about pulling back on its historic easy money monetary policy. What should you do with this recent rise in rates?
Why are rates rising?
Most of the recent rise should be attributed to Fed Chairman Ben Bernanke’s comments indicated that the government may reduce its ongoing $85 billion mortgage-backed security repurchase program. The intent of the program was to keep rates low and provide incentives for home buying. In many respects, the goals outlined in the program have started to positively impact the housing market. Recent data has shown that pending home sales have risen substantially or over 10% or higher year over year in many cities across the country. The other reason for rising rates may be in response to investors moving their assets out of bonds and into equities over future concerns in bond values. Please note that bond prices and interest rates are inversely related.
Will rates continue to rise?
We believe that much of the future lies in the Federal Reserve’s monetary policy. They may be trying to gauge the market’s reaction to their recent commentary to determine whether they will begin to reduce repurchases. However, we believe that the window for ultra-low mortgage rates is beginning to close as positive economic data and strong signs of a housing rebound continue to capture the attention of market participants and regulators. This is not to say that the time for buying a home or refinancing has passed. On a historic basis, mortgage rates are still very low and many homes are still selling at reasonable valuations. If you currently have a 5-7% mortgage, refinancing can still make a lot of sense. The general rule is to seriously consider refinancing if your mortgage rate is 1% or more than the current market rate.
More questions? Browse answers or ask your mortgage refinancing questions online.
Related Articles
->What Should I Know When Negotiating A Mortgage?
->Should You Be Worried That Mortgage Rates Are Now Rising?
->How Far In Advance Are You Locking In Your Mortgage Rate?
->Jumbo Mortgages Are Back In Style
->Refinancing a Second Home
->Who Can Claim the Mortgage & Property Tax Deductions in a Divorce?
->Should I Refinance My Mortgage?
->Getting Accurate Mortgage Closing Cost Estimates
