February 23rd, 2010

Mortgage Rates Forecast 2010 be prepared for rate hikes.  With the recent Fed Prime Rate increase, be prepared for those mortgage rates to start increasing as well. This means that qualified buyers who are on the fence over whether or not to purchase a home need to make up their mind – and fast.

For the past few years, we have experienced historic lows.  Last year, some lucky homeowners were able to secure loans at an unbelievable 4.65%.  These types of rates will become a thing of the past relatively quickly as the prime rate increases.

The prime rate is what the banking system uses to figure the cost of borrowing money overnight.  As this rate increases, it becomes more expensive for a bank to borrow overnight funds.  This means that banks must charge more for debt in order to make money.

In addition to the rate hike, the FED is going to stop purchasing Mortgage Backed Securities at the end of March.  This will leave a volatile part of our market in the hands of fickle investors.  Given the tumultuous history of these types of investments, don’t be surprised to see rates spike even higher as investors will see Mortgage Backed Securities as a risky investment.

If you’re in the market for a new home, now is the time to buy.  There’s an $8,000 refundable tax credit for first time homebuyers and a $6,500 refundable credit for qualified existing homeowners who wish to purchase a new home.  If you wait much longer, you might not be able to get as much house for your money.

Source:

Bankrate.com

SubPrimeBlogger.com