Rates Are Almost Certain to Go Up—But How High?

by Will Smith


There is consensus among housing experts and economists that mortgage rates will go up markedly this year, leaving behind the historic five-percent-and-below levels that homebuyers have enjoyed for over a year. The prediction is rooted in the fact that the federal government will end the trillion-dollar program to buy mortgage-backed securities that pushed rates down so low at some point in late spring or early summer.

So, barring an unanticipated extension of the program, the question is not if rates will rise, but by how much.

The San Francisco Chronicle just ran an article in which a number of experts were surveyed for their predictions, which ranged from 50 to 200 basis points, putting the resulting rate between 5.5 and 7 percent.

At today’s 4.875 percent, a $200,000 mortgage costs $1,058 per month. If rates rose to 5.5 percent, that monthly expense would rise $78 to $1,136. If rates rose all the way to 7 percent, the monthly cost would go up $273 to $1,331.

What’s your prediction? Where do you think rates will be at the end of 2010?

See other articles related to: mortgage rates, dclofts, dc area market trends

This article originally published at http://dc.urbanturf.com/articles/blog/rates_are_almost_certain_to_go_up_--_but_how_high/1789


  1. Jamie said at 3:48 pm on Wednesday February 17, 2010:

    My estimate is 6.5% max in the next 12 months as the government will step in again with more support if rates get too high.  But, I certainly wouldn’t count on 5% +/- for very long.

  1. Scrooge McDuck said at 4:28 pm on Wednesday February 17, 2010:

    Rates will remain flat until Q3. Max at 6%.

    Potential buyers will be in a frenzy before the 1st Time Home Buyer TC expires.

  1. MJM said at 11:51 am on Thursday February 18, 2010:

    Inflation will dictate.  Govt can’t keep rates low once the economy heats up (if it does) and will be forced to raise rates.  Look for a return to high single digits by end of 2011 (7-8%).  If you have a job and can afford a house, why aren’t you buying now?

  1. Janson said at 2:21 pm on Thursday February 18, 2010:

    There is too much cash out there looking for above treasury bond returns. Well-insured prime loan rates won’t go up much at all: 35 - 50 basis points to around 5.5%, much higher and the Fed would step back in (using a different mechanism). If rates go up much more there will be a second very large dip in the real estate markets and that will be politically unacceptable.

  1. Jay said at 11:53 am on Saturday February 20, 2010:

    “If you have a job and can afford a house, why aren’t you buying now?”

    Couldn’t increasing interest rates and expiration of the tax credit push prices down again?  that would be a reason not to buy now.

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