Mortgage Rates in Review…and a Look Ahead

Looking back on 2009, it appears that the average 30-year fixed mortgage rate was on a roller coaster ride.  The rate dipped below 5.0% for much of January, then it spiked up and down during the spring before taking a long drop to a near all-time low of 4.56% on November 30th.   

The roller coaster is headed back up again, and this time it may be a steep climb.  The Mortgage Bankers’ Association forecasts that 30-year mortgage rates will increase through 2010 to end the year at 5.7%.  Freddie Mac predicts an even grimmer future, expecting rates to get to 6.0% in 2010.  Morgan Stanley thinks they’ll go even higher to 7.5% or 8% … levels we haven’t seen since the year 2000.   

The reason?  The Federal Reserve’s program to buy $1.25 trillion in mortgage-backed securities has kept rates at artificially low levels in 2009.  However, the program is set to end in spring of 2010.  The recent climb in rates is due to the market reacting to this reality, with mortgage-backed securities traders anticipating the run-out of Fed funds.

What does this mean for borrowers?  If you’re thinking about buying a home or refinancing your existing mortgage, now might be the time to act.  Let’s compare a hypothetical mortgage today vs. one in the near future:

A $200,000 30-year fixed loan (assuming 20% down) today, when the average 30-year fixed rate is near 5.0%, would result in a monthly P&I payment of $1074.  Looking forward, if rates really do increase to 6.0% by the end of next year, this loan would result in a monthly P&I payment of $1199 –  $125 per month more expensive than today, or $45,000 more expensive over the life of the loan. 

If you want to make this same comparison on your own existing or dream home, just use this easy mortgage calculator.  Then, if you decide it’s time to buy or refinance, you can anonymously request custom loan quotes on Zillow.

Click Here to Get Great Rates And A Speedy Approval From Lending Tree Without Any Hassels.
Go to Source