Interest rates on home loans have begun to rise and that trend is expected to continue. If you missed out on the record lows, you should start looking for a home now.
The federal government has been keeping rates low by buying up Treasury bonds and securities that are backed by mortgages. Lenders have been able to provide loans at low rates and still make a profit with the governmentâ€™s help. However, that is expected to end in 2013. When this happens, lenders will have to increase the interest rates to continue to make a profit.
The government also helped out by allowing the short-term interest rate to be at almost zero. This stimulated the economy by allowing other interest rates to drop considerably. The economy has been improving in the last four years, as is evident by the increase in the number of jobs and the better standing of the housing market. Because the economy is no longer in as great a distress, interest rates across the board will begin to go up.
Historically, low interest rates for mortgages are extremely unusual. That means it cannot be expected for those rates to be sustained in the long-term. In fact, the previous low rate was seen in 2003 at 5.23 percent. It is more likely that the rates will hover around that point in the near future.
While mortgage rates are at a different percentage than Treasury bonds, you can determine what will happen by monitoring the two. When the Treasury bonds go up, you can expect the mortgage rates to also go up.
The government has promised not to stop the purchase of Treasury bonds until unemployment shrinks further. However, it is expected that they will scale back, possibly as soon as September 2013. For people looking to buy homes, this means that interest rates will begin to rise steadily. While the change wonâ€™t be drastic, it is unlikely that we will see the record lows of 3 percent.
If youâ€™re looking at buying in the near future, the message seems to be: the sooner, the better. The longer you wait, the more you will end up paying in interest. In conjunction with this, house values will also increase with higher listing prices than what is being seen now. You may have to pay several thousand dollars more for a house a year from now than what you will pay if you buy it now. It appears that the window of opportunity for home buyers to get a bargain on their new home is closing soon.