Mortgage Rates on the Rise

Historically low mortgage rates are just that: history, says CNN.

Historically low mortgage rates are just that: history, says CNN.

Home mortgage rates are climbing back up, according to an article recently posted on CNNMoney.  In recent months (and even years), housing loans have been floating at all-time low rates.  Why?  Over the past several years, the Federal Reserve has kept the Federal Funds rate (the rate banks use to lend money to other banks) low.  This allowed banks to lend out money at lower rates than they otherwise would've been able to do.  Furthermore, the Fed was also pumping money into the economy via the purchase of mortgage backed securities and long term assets. According to CNN, however, these purchases will be slowed down, potentially as soon as September. And if these purchases are slowed, in order for interest rates to stay low, private consumers would then have to purchase an equal amount of these assets (the Fed has been buying up nearly $85 billion per month, the article said). Doug Duncan, Fannie Mae's chief economist doesn't think rates are likely to stay low, and, what's more, he told CNN  "It's unlikely that rates will ever be that low again." Why is that?  The article offers several explanations.  One of which is that the economy is not where it was five years ago.  The economic recovery in the United States, particularly in the housing market, has allowed interest rates to climb back up toward where they previously stood.  CNN calls rates at 3% "unprecedented."  Typical mortgage rates (typical meaning prior to the 2008 housing collapse), fluctuated around 5.5%, with an all time low seen in 2003 at 5.23%. Over the last few weeks, the article states, 30 year fixed-rate mortgages have jumped from 3.3% to 3.91%, and 15-year loans moved from a record low of 2.56% up to 3.03%. Historically in the United States, mortgage rates have typically followed the 10-year Treasury Bond rates.  These rates, CNN says, have been on an inconsistent climb of late, currently falling somewhere near 2.1-2.2%.  With this inconsistency, it's hard to predict exactly where mortgage rates will land in the coming months, or how quickly they will climb. But one thing is for sure: 3% mortgage rates are a thing of the past.