May 06, 2010
Trends in the mortgage interest rate
Home loan interest rates are one of the key factors determining whether a household can afford a home. What are the trends in mortgage interest rates?
Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:
"Over the last year we have seen a big drop in mortgage interest rates. So that has actually helped people buy homes. So, for example, 30-year fixed rate (is) down from the mid-6s -- 6 percent range -- to about 5 percent today. One-year adjustable rate mortgage a year ago was a little bit over 6 percent now it is down to 3 percent today.
"So we have had big drops. That has actually helped people both buy new homes and has actually motivated people to be able to refinance homes. Now of course big question is, Fine, that's history; what's the future? Where are interest rates going?
"Most economists think ... mortgage interest rates are headed up. Maybe not very fast, but we think they are headed up. In fact, we have already seen some upward movement in the 30-year fixed rate recently. And this is because of two things: Number one, we think the Federal Reserve, which does have some control over short-term interest rates, will move their key rates up probably within a year. And then also we worry about the effects of the massive borrowing by the federal government on the credit markets. Will that cause interest rates to go up?
"So we maybe at a bottom here -- meaning that if you are ready to buy a house, just in terms of the financing, now is probably the time."
Posted by deeshore at May 6, 2010 09:59 AM