Saturday, December 20, 2014

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Rise in mortgage rates expected

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CNY/NNY/S. Tier: Rise in mortgage rates expected
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As we close the book on another year, we decided to take a look back on the year that was and a look ahead at the year that will be when it comes to mortgage rates. In this edition of Your Home, our Solomon Syed shares more.

"Since January we've seen a pretty sharp increase in interest rates. If you go back a year from now, you're going to find that the average 30 year fixed rate was pretty close to 3.5 percent, we're looking at about a full point higher for interest rates today," said Phil Reece, Homestead Funding Corp. Sales Manager.

So what's driving the increase?

"The biggest change in rates has been because of the fed's policy on what they've been doing with buying bonds. They had a policy called quantitative easing, which basically flooded money into the bond market and that artificially lowered mortgage rates for years. The fed policy is nearing its conclusion, they're just about done. They're tapering off that quantitative easing," Reece added.

Once the policy completely ceases, there will more than likely be a slight rise in rates, but they are still at historically low numbers.

"If you look at the published data, if you do an average of all of the mortgage rates over that period of time, it's nearly 7 percent. So if you're looking at a best execution rate, which is the best qualified borrower, being somewhere in the mid 4s, compare that to 7 percent and that seems like an amazing deal," Reece went on to say.

If you're looking to buy a home, you may think that rising interest rates could you cause to have higher payments, but there are other factors that also impact your rate and payment

"How good a credit score you have, is very important. It can affect rates more than the subtle change we've had in interest rates over the past three to six months. The type of loan product that you apply for makes a big difference as well," Reece said.

Reece also says that government loans like FHA, USDA and VA could be better options for buyers as rates continue to increase. ClientIP:, UserAgent: CCBot/2.0 ( Profile: TWCSAMLSP