Interest Rates Are Expected To Creep Up In 2011

The Great Recession and the resulting credit crunch did a number on the mortgage industry. Government programs, such as the bailout of the banks, were meant to ease the credit crunch and get money flowing to consumers again.

A foreclosure crisis added to the woes of homeowners, as the value of homes went down and many people found themselves “underwater” as they paid for a home that was actually valued less than the mortgage. The Federal Reserve and the housing industry continued to tweak things and for a while interest rates dropped and have remained low.

Even with continued low mortgage interest rates, as of the first half of 2011 the economy isn’t showing much improvement. In spite of reports that the numbers of jobs are increasing, the unemployment rate remains around 9 percent. Meanwhile the Fed’s interest policy has begun to tighten up. Then there is the federal debt, the need for a new debt ceiling and just plain politics that continues to spook the economy.

As a result, many analysts are predicting an increase in mortgage rates for the remainder of 2011. Some analysts are focusing on trends to expect as the year progresses. For example, they forecast that:

– Home mortgage rates will climb slowly over the remainder of 2011. The Mortgage Bankers Association (MBA) has said they expect interest rates to rise to about 5 percent. That’s up from the 2010 lows, which were close to 4 percent, but still very low as compared to past years. Advice to refinance a home or purchase a home using financing at these rates is still advised for 2011. Check out cool Real Estate Widgets.

– The sluggish economy will continue to have a negative effect as the year plays out and analysts expect that total mortgages will fall to less than $1 trillion. Because many of the homeowners who could refinance have already done so, refinance applications are expected to fall dramatically. It is said that refinanced mortgages account for 80 percent of all mortgages obtained in a year. The MBA suspects it will fall to below 40 percent in 2011. As a result, a larger percentage of the home loan market will come from home purchase loans. This could help to lure buyers to Jumbo Loan Mortgages. This means higher rates preventing some consumers from refinancing or buying more expensive homes.

– With Interest rates rising many expect that there will be more “all-Cash Purchases” of homes. A chief economist of the National Association of Realtors, Lawrence Yun, has said that “all-cash purchases” accounted for about 25 percent of all home purchases during the last four months of 2010. He guessed that these types of purchases will continue to account for a large share of the market this year.

Appraisal woes could also adversely affect the real estate market. The American Banker Magazine predicted late last year that many appraisers will choose to leave the industry. A decrease in the number of appraisers could mean higher costs, a longer wait for a mortgage and poorer appraisal quality.

So, in conclusion, expect rates to go up and a longer wait for your mortgage if you decide to jump in to the market before rates rise even more.

Online Calculator | Interest Rates Are Expected To Creep Up In 2011

Interest Rates Are Expected To Creep Up In 2011

Comments

Sponsors

Recent Posts

Tags