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Mortgage Rates Are Expected To Rise - Lock in Your Mortgage Rates Now
Home Prices Have Bottomed and Now Is The Time To Lock In A Low Fixed Rate Mortgage!
Formula for rising interest rates: When you combine the following events, you get higher and rising interest rates :
QE2 ends + falling dollar + rising energy costs (inflation) + proposed elimination of GSE = higher mortgage rates
QE2 (Quantitative Easing 2) ends in June. QE2 is the Fed Reserve program to purchase $600 billion in government debt to keep interest rates artificially low and push money into the economy. QE2 = printing $600 billion in new money. When this program ends, interest rates will likely rise by 3/4% - 1%, the current rate subsidy by the Fed.
The dollar has weakened, oil is now trading a $109 per barrel and a gallon of regular gas is now $3.82 nationally and is expected to break $4 per gallon by summer. This is inflationary as energy costs impact all facets of our economy and interest rates rise to meet inflationary expectations.
Homeowners should buy now to lock in historically low 5% 30 year fixed mortgage rates. Why?
1. The current real estate prices in our market have bottomed - see Essex County Median Price charts
2. Mortgage rates will rise when QE2 ends in June
3. Rising oil prices (falling dollar) / inflation will drive mortgage rates higher - see oil chart and dollar index chart
4. The stated goal of the current administration is to eliminate the Government Sponsored Enterprises (Fannie Mae, Freddie Mac) and have banks bear the risk of all loans within the next 2 years. If this occurs, rates will rise substantially.
Essex County Single Family Median Price as of 4-16-2011
Essex County Condo Median Price as of 4-16-2011
Price of a Barrel of Oil Chart 4-16-2011
Salem MA gas prices 4-15-2011: $410 high test, $4 Medium, $3.78 Regular
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