Surge in Mortgage Rates Could Force Buyers Off The Fence

When Federal Reserve Chairman Ben Bernanke mused in May that the Fed might eventually scale back the pace of its bond purchases if the economic recovery continued, investors began to panic. Without the Fed injecting liquidity into the market, investors worried that borrowing money would get more expensive, and those worries drove up interest rates on long-term bonds. This in turn caused mortgage rates to climb to their highest levels in over a year.

Even though Bernanke immediately reassured the market that any withdrawal of the Fed's bond buying program would be done extremely gradually, rates have continued to rise.

But before you panic, keep in mind that even at their new levels, mortgage rates are still low by historical standards. Combine that with affordable house prices that have only climbed back to about 2003 levels, and home ownership is still an attractive prospect.

In fact, many people who were sitting on the fence waiting for the housing market to stabilize now see rising rates as a sign that they should get into the market before things get too expensive. Making the “buy now” decision even more logical is the fact that most analysts don’t expect rates to keep rising as quickly as they have been in recent months.

In fact, things are looking pretty promising for America’s housing market. Prices have climbed, foreclosures have slowed, inventories have tightened and more homeowners are back above water on their loans. Granted, if you’ve been waiting to refinance, now may not be the best time. But if you’re looking to get into the market or move up, overall conditions are promising, including a much brighter job market.

For a free analysis of how your specific needs fit within the current housing and rate market, feel free to give us a call. I’d be happy to sit down with you, analyze your situation and make expert, unbiased recommendations. Call us today!