Did I scare you yet?
The Federal reserve (Fed) has confirmed their position that it will most likely stop purchasing mortgage backed securities at the end of March. The FED has been buying the securities since January 2009 which kept the housing market from sinking to lower levels than it has. Because of the Fed's actions interest rates have been held at historic lows during a very critical time for the housing industry. With the FED backing out of securities business there is no question that rates will begin to rise, but to what extent?
Most experts are trying to decide how much the rates will increase. Using the 30 year conforming rate as the guide we're hearing anywhere from 5.75% - 6% and fairly quickly. Most experts expect the rates to fluctuate between these two points through the fall and then another potential increase after that. Regardless, rates will begin to go higher and soon.
Here is what we do know; Interest rates today are GREAT, housing prices are lower than in years and the government is proving tax credit incentives for first time home buyers as well as qualified move up buyers. If you're in the market for a purchase this year I would strongly consider moving a little sooner than later to take advantage of today's great rates. I would not however, make a decision to stretch on a property and payment that isn't right for you due to incentives alone. As always, make sure you stay in your financial comfort zone.
Home Mortgage Consultant Kenneth B. Dickerson can be reached at:
RWF Mortgage, LLC
2663 N. Halsted Street
CHICAGO, IL 60614