I'm wondering what the consensus of opinion is on the direction of interest rates?

Asked by Marianne Bandy, Englewood, CO Tue Feb 16, 2010

I've heard the Fed. is scheduled to stop buying mortgages in March. And we also have all this debt from stimulus plans, which probably means higher inflation at some point.

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68
Voices Member, , Benton County, OR
Tue Feb 16, 2010
BEST ANSWER
When discussing interest rates there is a Major difference between they will perhaps rise to 6% and they will reach 9/10%.

6% is still a lower rate than when this current market began and 6% for many is not a killer rate as 9% would be...If prices continue to fall then 6% means little...5% now may go to 6% is in no way similiar to 5% now may go to 9-12%.

Other views/forecasts for the next year or so....http://www.marketvector.com/interest-rate/fha.htm

http://www.mortgagenewsdaily.com/consumer_rates/ .... http://www.realestateabc.com/rates2.htm

Besides the common sense of keeping rates low to encourage buyers in a shaky weak market/economy, here are some another reason the Fed. Gov. may basically forced into doing what it takes to keep them low...
http://www.marketwatch.com/story/lingering-mortgage-woes-cri…

My forecast (and we'll know in the next several weeks) the Federal Reserve will extend the purchasing plan and strive to keep rates low in a very unstable market/economy.

If I'm wrong feel free to return and point it out....However if I'm right????
1 vote
Debra (Debbi…, Agent, Livingston, NJ
Tue Feb 16, 2010
It's funny - I bought my first house in 1976 with an assumable 8% fixed rate mortgage...we thought that was a pretty good loan %.........and for a number of years later, it looked really good, as rates soared quite a bit above that number.

Now there is fear at the thought of rates "soaring" to 6 % or higher...........we've gotten spoiled........even at 6%, I think it's a reasonable rate - and certainly, still historically low. If the numbers in the chart Dunes provided (in the link) come true........over the next couple of years , the %rates will rise to the upper 6's......still no reason to panic, in my opinon.
.........................................................
Likewow:

"In the end, it may just you and your bayonet between the starving psychopath on your lawn and the last potato in the county".......................Likewow - you have a flair for the dramatic.........I'm in trouble, though, I don't have a bayonet, but I do have a potato. I think tonight I'll mash it.
2 votes
Gary King, Agent, Knoxville, TN
Mon Mar 1, 2010
We can't have inflation because of unemployment is so high. The government can't afford millions of starving people which is what they have almost have now. Our industry has also been hit but seems to show some life but not much.

Inflation...no
1 vote
Corey Grushin, Agent, East Brunswick, NJ
Tue Feb 16, 2010
Attached is a website dedicated to to the mortgage shoppers & professionals. The thought is rates won't go back to 2009 levels so they will only go up, but there are issues that unforeseen which could kkep rates at current levels for some time. The Fed program for buying MBS's has a contingency clause to purchase more if the market warrants it
1 vote
John Shellin…, Agent, Pearland, TX
Tue Feb 16, 2010
The Euro Zone problems are making our bonds look a little more attractive which helps keep rates down but the trend will be up and it can be sudden. It will be interesting to see what happens when the Fed quits buying mortgage backed securities this spring. Their buying has kept a lid on rates. We are still at historic lows. Is it really worth trying to squeeze out another .125% or .25% by playing the down side. I don't think so. The next solid move on rates will be up with very little hope for a decrease from where we are at now. Lock!
1 vote
Ray, , Denver, CO
Tue Feb 16, 2010
Marianne,

I believe you would hear similar answers from most. We know the Fed committed to buying a certain amount of MBS (mortgage backed securities). That program is coming to an end. With the concern over inflation long-term if long-term rates stayed low would lead you to assume rates will trend higher. However, they have remained at or below 5% for some time. I can say before the last 12 months, many of us could have easily pegged the trend. But given the market is currently not a "REAL" interest rate market , I think even the most astute bond traders on wall street would have trouble knowing exactly where things will go. I would expect them to stay low after the FTB Tax Credit disappears to help stimulate buying, but as the year moves forward I think we will see them climb closer to mid to high 5% range based on statical data. The best thing your buyers can do is apply the MCC to their mortgage to offset rates by adding the tax credit the MCC offers. This is very different than a tax deduction.
1 vote
Alan Strange, Agent, Westminster, CO
Tue Feb 16, 2010
Everything I'm reading is saying the rates are going to be creeping up this year for the same reasons that you indicated here: inflation, the Fed stopping purchasing securities in March and debt. The facts remain that rates are still historically low and with the right down payment people can still get great financing.

Alan Strange, Team Leader

The Strange Team
11859 Pecos Street, Suite 200
Westminster, CO 80234
Keller Williams Preferred Realty
Phone: 303.668.5208
Fax: 303.452.9620
Corporate Office: 303.452.3300
1 vote
Ron Rovtar, Agent, Boulder, CO
Sun Mar 7, 2010
Hi Marianne:

Just when it seemed there was a consensus among the "experts" that mortgage rates would go up significantly after the Fed stops buying mortgage-backed securities April 1, along comes Sven Jari Stehn of Goldman Sachs suggesting that any rise might be minimal. Interesting!

Check out the link below.

Best,

Ron Rovtar
Prudential Real Estate of the Rockies
Boulder, CO
303.473.1926
0 votes
Outsicktoday, Both Buyer And Seller, Victorville, CA
Sun Mar 7, 2010
Not me, it's a foolish time to buy right now. Wait and see what happens when the GOV stop propping things up, and if they continue to prop things up then that means the market can't stand on it's own. When the training wheels get pulled off then I will buy. Sure the rates might go up, but prices will fall if that happens. I'd rather have a high rate and a lower principal.

Also the tax credit keeps getting better, why buy now? Maybe next time you could get $10,000 to buy a home or zero down FHA. The deals out there now will be there in one form or another for another year or two, so I will wait like a shark in the water for the right moment.
0 votes
Laura Castel…, , Gloucester County, NJ
Tue Mar 2, 2010
I also heard around March they would be climbing up around the 6% range. It is surely a great time. Since I remember when the rates were 18%, 79'. Compared to that, I have to say, it's a great time for sure to buy.
0 votes
David Anders…, Agent, Visalia, CA
Mon Mar 1, 2010
My Opinion is that interest rates will start creeping up and up. I hope they don't but the Fed has been artifitially keeping down the Interest rates through all there doings of buying mortgages and other measures. However that will soon come to an end and the real economics will take a hold . My real hope is we don't hit hyper inflation and get to Jimmy Carter Level interest rates of 17 & 18 percent.
0 votes
Voices Member, , Benton County, OR
Mon Mar 1, 2010
I would suggest some look up the difference between DE flation... your money can purchase more...IN flation your money can purchase less...Does a house cost more now, a car, a tv, food, gas than last year?

A ballon pops then it deflates

What does $200,000 purchase now in the Housing Market? More or less than before? What will it purchase in 6 months, a year....

If you are suggesting you'll be able to purchase LESS for that amount in 6 month/a year then perhaps inflation can be tossed about but then we'll have to discuss degrees of inflation.....

The interest rates were lowered to stop the DEflation of the Housing Market, are we claiming that's been accomplished and now the Gov will suddenly forget the role rates play in stopping deflation or the lower rates are not needed?

This discussion is no different than the discussion about the tax credit...It's created and then months of oh no it's gonna end it's gonna end so you better buy you better buy...Then it's renewed and oh no it's gonna end it's gonna end.
Interest rates are not being handled much differently, every since they went down..oh no they are gonna go up they are gonna go up better buy now better buy now....and when questioned about that claim..I have no crystal ball I have no crystal ball

What you don't have is a clue and neither do I, we are both guessing based on numbers, information and statistics from the very slimeballs that created this mess.......

So use that Real Estate expertise as Economists to tell the Public....You better buy now, you better buy now...
0 votes
Brian McMurr…, Agent, Tawas City, MI
Mon Mar 1, 2010
Going out a a limb here but believe rates will continue to fluctuate and go up and down. Rates are currently great and still a good thing for those who can buy.
0 votes
Outsicktoday, Both Buyer And Seller, Victorville, CA
Wed Feb 24, 2010
If they are raised it will ruin the fake recovery. I think the Gov is trying anything to persuade people that they have to buy.

Manufacturing consent, creating a false market.
0 votes
Kent & Emmary…, Agent, Tucson, AZ
Wed Feb 24, 2010
Rates are definitely low, so the answer is up - how much & how fast, who knows?

My crystal ball took early retirement a long time ago, so I'm using a Magic 8 Ball now when it comes to predicting interest rates. Let me give it a shake here...just a moment....its floating to the top now....ahhh!

"Too Early To Tell" is what old 8-ball sez.

The only thing I am telling my clients right now is that rates have been low for a long time - historically low. If you get it while its good, you can do allright. Holding out for the absolute lowest rate might be like hoping someone won't take the last piece of candy at Halloween - good luck, and hope that anything you do get belongs to the wrapper you found it in!
0 votes
Rhonda Mercu…, Other Pro, Apollo Beach, FL
Wed Feb 24, 2010
I believe the intrest rates will stablize for a little while. We still have the tax credit in place till the end of April.
0 votes
Karen Parsons…, Agent, Laguna Beach, CA
Wed Feb 24, 2010
The ironic thing is that the best rates right now on a 30-year fixed are loan modifications. Whoever thought that a borrower who has not been current for over a year can get a 4.5% 30-year fixed rate loan. The world is officially upside down.
0 votes
greg, , Boston, MA
Wed Feb 24, 2010
These low interest rates are killing the secondary market. Eventually they will have to go up!
0 votes
Bridget Dele…, Agent, Oak Forest, IL
Wed Feb 24, 2010
The rate changes daily.
If you know what lender your going to use, have them keep you updated on the current rate. It's a good idea to call a few lenders to see how they match up against the other.
0 votes
Victoria Car…, Agent, Cookeville, TN
Wed Feb 24, 2010
I went to a meeting at Cumberland County Bank And a spokesperson from Suntrust was there and gave the national projections for 2010. The interest rates will raise at a steady pace and be to over 6% or over by the beginning of 2011.
Web Reference:  http://www.athomeintn.com
0 votes
Ursula Sailer, Agent, Lakeville, MN
Wed Feb 24, 2010
Last week I would have said they are going up soon - now I believe that they will remain low maybe through the year.
0 votes
Voices Member, , Benton County, OR
Wed Feb 24, 2010
Marianne

Please remember Sales are up, we've been hitting the bottom and recovering everyday since 2007, rates will never be lower (oh wait that was 2008, no wait yesterday, no wait tomorrow , oh heck nevermind), multiple offers everywhere, consumer confidence in Agents is high because of their trustworthiness and Agents are all like Doctors/Lawyers in their expertise/ability to pull teeth.

Why worry about interest rates the public loves/trusts Agents and we's got nothin but good times ahead....Sell your home Marianne and Buy now it's never been better........

Dunes
0 votes
Pam Boyle, Agent, Winston Salem, NC
Wed Feb 24, 2010
From all of the info that I have been reading, the Federal Reserve is not planning to continue the purchasing of mortgage backed securities. The word on the street is that Mortgage interest rates will begin to rise very soon as they typically do in the spring buying season. Also keep in mind that FHA is raising the amount of down payment that they will require!
0 votes
Karen Parsons…, Agent, Laguna Beach, CA
Wed Feb 24, 2010
Up, up, up.....way up and maybe soon. Yikes!
0 votes
..., , Lexington, MA
Wed Feb 24, 2010
Wow - you opened a Pandora's box and some playful banter between respondents!

Let me preface my remarks by my typical response of "If knew exactly what mortgage interest rates would be doing you wouldn't be hearing from me - I would be retired."

The Federal Reserve's purchasing of mortgage backed securities was one of its "quantitative easing" tactics to help with the banking crisis and isn't isn't normal course of business. In any case, it's important but not directly relatated to interest rates.

Mortgage interest rates have little room to move further downward. When I purchased my first home getting a single digit rate was huge - my friends all were in the 10% and 11% area. With that perspective, my guess is that they'll be going up and quicker than they had fallen.

I'll put on my raincoat and helmet now for the feedback.
0 votes
Dr. John McM…, Agent, Clovis, CA
Wed Feb 24, 2010
Hi, Marianne. That's an easy one! They're going up - WAY UP! I'm attaching an article which show how you can tell when they're going to go up.

Dr. John McMillen
Clovis Real Estate
ClovisExperts.com
0 votes
Bridget and…, Agent, Inver Grove Heights, MN
Wed Feb 24, 2010
What we are hearing from the mortgage professionals is that the rates, which have been kept artificially low by the fed (buying mortgage backed securities is one way they have done that) are going to rise. The support of these low rates, sometimes under 5%, is going to stop in March, when they will stop buying these mortgage backed investments. Because there is a political tsumami in this falls' national elections, the feeling is that the rate will not rise much until after November. The current rate environment is likely to be very different by next year.
0 votes
Cecilia Litv…, , Hampstead, NC
Wed Feb 24, 2010
Reports from both the residential and commercial sectors indicate that rates will hold steady for the next few months. Although debt has risen, the increase in the unemployment rate appears to be keeping the prime rate from going up. There is concern that increased rates will again impact on sellers' ability to pay and may deter future buyers from purchasing in this economy. The commercial sector reported that banks are loosing up their lending practices alittle by renewing loans and hopefully banks will do the same for the residential market. Rates should see a bump up later this year to test the strength of the economy. TY
0 votes
Carmen Cattl…, Agent, Charleston, SC
Wed Feb 24, 2010
Well greater minds than mine can't seem to answer this one. As for my two cents , well I think the interest will continue to stay low, although they may inch up a little to test the waters.
0 votes
Gary King, Agent, Knoxville, TN
Wed Feb 24, 2010
Interest rates are going to say about the same with just a tick upswing because Wall Street can't help in when it comes to giving themselves large bonuses and Congress doesn't have the stomach to say no because they receive monies to support their campaigns. Unemployment will improve a bit as Congress continues to spend money for tax credits
0 votes
Ron Rovtar, Agent, Boulder, CO
Thu Feb 18, 2010
Hi Likewow:

Thanks for the question. I think maybe I wasn't quite clear enough. The mortgage broker I was discussing below was not talking about an interest rate increase imposed by the Federal Reserve Board of Governors. He discussed what is likely to happen to mortgage loan rates when the Fed ends its massive debt purchase program, an event that is now scheduled for April 1. Without support from the Fed, mortgage interest rates will depend on the good will and business judgment of investors. Investors will not purchase the loans unless they feel the rewards outweigh the risks. As such the investors will likely ask higher interest rates, which will be passed on to borrowers, of course.

I don't believe that the broker from Cherry Creek Mortgage has written anything about his views.

Best,
Ron
0 votes
Mack McCoy, Agent, Seattle, WA
Thu Feb 18, 2010
I wish I could be concerned about "monsters hiding in the bushes," but, I'm not.

Yes, it came as a surprise to the world's banking community that tens of trillions of dollars of MBSs were sitting on the books of very undercapitalized banks.

Which doesn't mean that there's a particular wisdom to expect that there are many more surprises like that hiding out any place.

Disaster may come at any time, from a variety of sources.

I think that it is "hiding your head in the sand" to act as if disaster is imminent; I think that "walking tall with your head held high" means being aware that there are unknowns, but not being consumed by the thought.

All of the things we're discussing here are matters of fairly widespread awareness. As such, I'm not so worried about them.

It's truly the things that none of us are aware of that worry me more!
0 votes
Ron Rovtar, Agent, Boulder, CO
Thu Feb 18, 2010
Hi Dan:

I agree we are headed into difficult waters as the government winds down efforts to keep the economy moving along. Hyperinflation, as you point out, is one of the monsters that could be hiding in the bushes. I think it is particularly unfortunate that as we all breathe a sigh of relief that things didn't get worse than they did, so many people assume the situation would have degenerated no further without the Bush and Obama programs. What's really important now is for the government to make sure its exit strategy is orderly and flexible enough that it causes no additional problems or, worse yet, a second economic dip.

The economy remains in poorly charted waters. As usual, everyone has an opinion about what should happen next. Whether we like it or not the captain and his advisers will have to make the decisions and then we will see what happens. In the meantime, these people deserve some support from all of us, including those Congressional yahoos in both parties who seem more interested in their political futures than in the people who are hurting as a result of circumstances.

Best
Ron
0 votes
Robert McGui…, Agent, Denver, CO
Thu Feb 18, 2010
Marianne,

Look what you started! Strike up the band, the circus is in town! (-; But once the din of the comics and poets and blowhards settles back down to quiet reality; two thinkgs remain in this Denver Market. The interest rates are not going down to 4% and the prices are about as low as they will go in most areas and in many areas rebounding. With that in mind, for most people who want to purchase a home in the next year and are prepared with their credit and down payment, etc. and would like to appropriate the $8000.00 'windfall'; this could conceivably be 'the best time in their life to purchase a home'.

Robert McGuire ASR
Broker/Consultant
Your Castle Real Estate
rmcguire@yourcastle.org
http://www.rmcguire@yourcastle.org
0 votes
Dan Chase, Home Buyer, Texas City, TX
Thu Feb 18, 2010
Ron, I have been figuring on a rate somewhere between 6 & 7%. You finally found a real professional who agreed with my rough figuring by gut.

If hyper-inflation does arrive, it could even be a lot higher. That is the elephant behind the curtain that may or may not come out sometime soon.
0 votes
Ron Rovtar, Agent, Boulder, CO
Thu Feb 18, 2010
Hi Mack:

Sounds like we pretty much agree then. I just spent an hour listening to one of the most respected mortgage brokers here in the Denver/Boulder area. He suggested that when the Fed pulls out, interest rates won't just move up a gentle incline –– they could pop up practically overnight. He also spoke about the possibility of a two percent jump rather than the one percent rise we have been hearing about. Don't know if this will happen, but the near future will be interesting.

Best,
Ron
0 votes
Mack McCoy, Agent, Seattle, WA
Thu Feb 18, 2010
Ron, of course not. That's something the real estate hobbyists have come up with - The Real Estate (wo)Man is out to get us, always telling us Now Is The Best Time To Buy . . . you know the song.

The fact is, it is always a good time to buy or sell - for somebody, under some circumstances. Market troughs are good times for people with cash to pick up bargains; this is a historical fact about the way real estate fortunes are actually made, by the way. Market peaks come after a long run-up, when people who are tired of watching other people make money finally climb on board, albeit it too late.

There are some things that we know for certain. Today's prices are lower than they've been in several years, and interest rates are lower than they've been in even longer. You can buy today knowing you've got better prices and terms than any time in the past few years.

Or, you can wait, and take your chances. Five percent money over thirty years seems pretty sweet to me.
0 votes
Debra (Debbi…, Agent, Livingston, NJ
Thu Feb 18, 2010
Likewow..........you missed your calling. You should be wriitng lines for soap operas or romance novels - your flair for drama is fine tuned........that " freezing brokers on the sidewalks babbling" line made me laugh - for real...............you create interesting visuals.

Back on topic.......most agree the direction will be up at some point , not down, for rates........I don't see any need to panic, as the upturn probably will still keep rates at historical lows.
0 votes
Ron Rovtar, Agent, Boulder, CO
Thu Feb 18, 2010
Gee Mack: Thanks for the sarcasm!

Just to set the record straight, however, I have never suggested to a client that "it has never been a better time to buy." I simply give folks the facts and try to help them figure out what those facts mean for their particular home investment.

There are relatively few times when one knows what the Fed is going to do on a particular date and what the Congress and Administration will probably do at a particular time and what investors will almost certainly do as a result. Sometimes the stars line up as they are doing now and even those of us who do not go out of our way to "create a sense of urgency" feel it is important to inform our clients about what is going on. In fact, I think that is my job! Hopefully you do too.

Best,
Ron
0 votes
Mack McCoy, Agent, Seattle, WA
Wed Feb 17, 2010
- Brokers freeze to death on sidewalks, babbling 'it's never been a better time to buy.'

OMG! WHY DIDN'T YOU TELL ME?!! AIIEEEEEEEEEEEEEEEEEEE!!!!!

Was that the response you were looking for?
0 votes
Ron Rovtar, Agent, Boulder, CO
Wed Feb 17, 2010
Hi Marianne:

Looks like you stirred up a lot of interest with this question. I think it probably is fair to say that interest rates will not stay at this level for long and it is hard to imagine them going down from here. The Fed has said that it will stop supporting the mortgage market as of April 1. However, various Fed leaders have signaled that the fed could get back in if the rates start getting out of control. Reading between the lines of various comments, it seems like something around six percent would probably be okay with the Fed. At the same time, Congress and the Administration seem willing to use current programs to keep rates at a level that would stall neither the general economic recovery nor the housing recovery. But, the best rates (and the best time to buy a home) may soon be in the past. Rates probably will go up soon and Congress has suggested it will not renew the home purchase tax credits again. Buyers who do not take advantage of the current conditions soon may find they can afford to buy less after this spring.

Ron Rovtar
Prudential Real Estate of the Rockies
Boulder, CO
303.473.1926
0 votes
Voices Member, , Benton County, OR
Wed Feb 17, 2010
Marianne

Thank-you for the Best Answer especially since there were several good comments it is greatly appreciated.

Dunes
0 votes
Mack McCoy, Agent, Seattle, WA
Wed Feb 17, 2010
OOH! What Happens If? We'll see, won't we?

I'm still trying to figure out how you reconcile a 90% drop in housing prices with an economy where working families are buying real estate. I guess that was so, February 16th.
0 votes
Mack McCoy, Agent, Seattle, WA
Tue Feb 16, 2010
Likewow, let's not play scatter-shot. Also, beat poetry went out in the '60s; slam poetry does not translate well to blogs.

You can bet on the black swan or on double-zero, and when it hits, people will call you a genius, which isn't the same thing as being one.
0 votes
Julie Beall, Agent, Springboro, OH
Tue Feb 16, 2010
wow, you have had quite a response, my answer to your question is YES, they are going to go up slowly beginning in March.
0 votes
Mack McCoy, Agent, Seattle, WA
Tue Feb 16, 2010
Actually, Dan, I prefer being dazzled by explanations to being baffled by bluster!
0 votes
Dan Chase, Home Buyer, Texas City, TX
Tue Feb 16, 2010
Mack, it was a momentary lapse of a past life intruding into present time for him. He forgot it is not 1453 any longer and that he did not make it through that day.

That or he was trying to say things are bad and getting worse.

I like my first explanation better, even if highly implausible.
0 votes
Mack McCoy, Agent, Seattle, WA
Tue Feb 16, 2010
I think he's spending too much time on Calculated Risk, and not enough time socializing.
0 votes
Voices Member, , Benton County, OR
Tue Feb 16, 2010
I think it means "direction of interest" Rates a big Yawn
0 votes
Mack McCoy, Agent, Seattle, WA
Tue Feb 16, 2010
Any idea what he's talking about? Apparently, we are to all quake in fear of an imminent Armageddon because, well, the world's governments are interfering with the free market? Or is there some hidden warning not to count on help from the Adriactic?
0 votes
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