Mortgage Rates Expected to Rise
Effect on Rental Market Could be Positive
Mortgage rates are still at historic lows. For borrowers with strong credit, 30-year fixed rates are around 5%, which is as low as it’s been in 60 years. This is due to the Federal Reserve’s activity in mortgage securities, which is scheduled to end March 31.
While analysts think that any immediate effect of this action will be minimal, interest rates are still expected to rise over the remainder of 2010. How much depends on the economic recovery and other domestic and global factors.
On one end, financial analysts predict mortgage rates will stop rising at around the 5.25% mark by year’s end. However, others, like Moody’s and Barclays Capital, think interest rates will top out at 5.7% and 6%, respectively. The higher figure is based partly on heavy US government borrowing and a stronger economy.
Combined with the end of the first-time borrower’s tax credit, the threat of rising interest rates could spur home buyers to make every attempt to put a contract on a house in the next six weeks. The tax credit is due to expire at the end of April, so many house hunters feel a real sense of urgency.
Rising rates have significant affects on borrowers, limiting the price of homes they qualify for, or pricing many out of the market altogether. That news could be good for rental property owners and managers!