Mortgage rates have hovered around yearly lows for weeks. But with rate-hike forecasts looming, can buyers count on borrowing costs to stay low?
Many economists are predicting the average 30-year fixed-rate mortgage to reach 5% by the middle of the next year, The New York Times reports. Freddie Mac reported the 30-year fixed-rate mortgage averaging 4.20 percent. The hike in rates is partially due to the Federal Reserve’s plan to withdraw from buying mortgage-backed securities.
Economists note that while a 5 percent mortgage rate is low by historical standards, such an increase still has the potential of reducing buying power in a home purchase. According to some estimates, a 1 percent increase in interest rates can raise a monthly mortgage payment on a typical home by more than $700 in pricier parts of the country. The increase would likely be much more modest in other, less expensive markets.
Source: “When Mortgage Rates Rise,” The New York Times (Sept. 25, 2014)