Mortgage Rates Are On The Rise

(Originally published April 17, 2010.)

For the past year, unique and extreme economic conditions helped maintain mortgage rates at historically low levels. But it seems the party’s now over.

In late March, the Federal Reserve discontinued their temporary policy of buying mortgage backed securities (MBS) – one factor that maintained the pressure on keeping rates low. Once again, MBS must compete against other investments for investor dollars. As investors demand higher returns on their money, the markets will adjust in turn. Bond yields and MBS yields will rise.

Historically speaking, when the US economy recovers from a recession, interest rates tend to rise, reflecting the recovery. The economic news over the past few months has grown more encouraging. (However, during a slow recovery, not every economic report will be rosy. You must look at the over-all trend.)  Statements from the Federal Reserve Open Market Committee are becoming more optimistic, though with a healthy dose of caution. The economy is gaining its footing and we are seeing upward pressure on interest rates.

As a home-buyer or home-owner, what actions should you take?

• If you’ve been contemplating refinancing your mortgage, the Ship’s whistle has blown and it’s pulling out of port. Contact me immediately to determine whether there is still an opportunity and benefit.
• If you’re contemplating buying a home but have been sitting on the fence, now is the time for action. Contact me and let’s determine your mortgage qualifications. Let’s implement a plan to find the right house and match it with the right financing to meet your needs and goals.

Don’t expect mortgage rates to increase in a straight line. Mortgage rates will ebb and flow along with other benchmarks and commodities. But as the economy ever-so-slowly climbs out of the recession, borrowers and mortgage-watchers should get more accustomed to seeing firmer rates in the marketplace.

Since 1992, Warren Goldberg has helped thousands of clients own their homes, refinance their mortgages, restructure their debts, and invest in real estate. Warren is known for his wide knowledge of mortgage products and wealth-creation strategies.