Mortgage Rates on the Rise – Upward Trend Expected to Continue

The interest rates on mortgages are increasing and they are going to climb further up in the coming months. Right now, the average rate on a 30-year fixed mortgage is 4.5%. Last week, it was 4.37%. This is the fastest pace of increase which the rate has marked in a year. Furthermore, just one year ago, the rate was roughly 1% lower than it is today.

There are several factors contributing to the dramatic increase of the mortgage rates. The first one is the expected reduction in the QE3 program adopted by the Federal Reserve in 2012 and intended to stimulate consumers to take out home loans. The Federal Reserve intends to reduce its bond purchases for $85 billion a month and this will push the interest rates on home loans up. So far, the increase has been significant, but the rates still remain quite low especially compared to the times of the housing market boom.

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The fast weekly increase from 4.37% to 4.5% was fueled by the forecast of the Federal Reserve that the Fed Funds Rate will increase sooner. 6 members forecasted an average increase of 0.25 by the end of 2015. The Fed Funds Rate is not directly linked to the mortgage rates. They are not adjusted base don it. However, the financial markets were greatly surprised by the forecast and this is what led to the “shock” increase.

The upward trend for mortgage interest rates has been around for several months now and is projected to remain that way. Experts suggest that there will be a sharper hike sooner than was previously expected. There may be occasional falls but the rates will be going up in the mid term.

The current period is transitional from historic low mortgage rates to new higher rates. The financial markets are highly sensitive to all news and not only to announcements made by the Federal Reserve. In this situation, significant interest rate increases like this week’s one are possible.

Christian

Christian

Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info
Christian

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