Rates Are Low FOR Now… But Higher Rates Are All But Certain To Come

Written by on January 10, 2012 in New Jersey Mortgage Rates - 1 Comment
Mortgage Interest Rates Are At Historical Lows, Will It Last?

It is nearly impossible over the past two years to open a newspaper, go online, or listen to the news, without hearing something about mortgages and low rates.  Unfortunately, this reporting is also typically followed up with discussions regarding how difficult it is to qualify for these low rates.

Despite the difficulties of obtaining a mortgage these days it is most definitely worth trying.  You might ask, “Why should I try if it is so hard to get a mortgage?”  There are two simple answers to this question; if you can get approved, the lower interest rate is likely to save you thousands, if not hundreds of thousands of dollars over the term of your loan.

The second reason; mortgage rates are likely to go up.

Why might mortgage rates go up?  Over the past few years the government has been adding liquidity to the mortgage market.  This means they are helping to subsidize and provide capital for loans to be made.  They have also kept rates low by not increasing fed funds, or the money banks have access to in order to lend you money.

It is very likely that this government assistance will slow over the next few years as banks and lending institutions become more stable again.  The mortgage-backed-securities market will most likely return to it’s normal ‘checks & balances’ where we will see interest rate spreads increase.  This could be due to many reasons but one is that the ‘cost of money’ for the banks increases, in turn, that increase gets passed along to the mortgage consumer.

Rates can increase for many reasons, most of them out of our control.  The reality is rates can only stay low for ‘so’ long before the economic cycle takes them back up.  Without a crystal ball it is difficult to tell when rates may start rising.  If you’re on the sidelines and have been thinking of refinancing or purchasing a home, now may be the best time.

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