Mortgage Rates Prediction
Mortgage rates predictions have been confusing observers lately, as mortgage interest rates are supposed to track the Federal interest rates. The Fed has been lowering rates steadily for some time, but mortgage rates continue to climb.
Current Mortgage Rates Predictions
As a home owner it is important to understand that there are conflicting pressures on mortgage rates predictions.
Inflation is rising, which always feeds into interest rate predictions.
Apart from the underlying real interest rate determined by the broader economy, the rate of inflation, and the supply of money available for mortgage lending, there is another factor which comes into play in any investment decision – risk. Mortgage rates in general will depend on the overall risk involved in the housing market.
If house values bottom out, as they have in some parts of the US, then the default risk for the banks suddenly increases, which means that they will be wanting to charge higher mortgage rates; predictions will take this upward pressure into account.
Mortgage interest rate forecasts need to take into account the political imperatives as well as the purely economic influences on interest rates. Voters are particularly sensitive to losing their homes in large numbers, and the government is keen to avoid the scenario in which interest rates go up, and more homes are foreclosed, only to be sold into a plummeting market, further worsening the oversupply problem in residential housing.
Everyone – the government, the banks, and the home owners – are in agreement that this is an outcome to be avoided. Mortgage interest rate predictions based on purely economic considerations might indicate that mortgage interest rates are due to rise, but while the political pressure is running high, and in an election year, the government will do everything in its power, however economically irresponsible in the long term, to push the interest rate rises off until after the November elections. Mortgage rates forecasts must take this political distortion of the financial markets into account.
For the full story on factors influencing interest rate predictions, visit Mortgage Interest Rates Predictions.