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Mortgage rates have been on the rise. Is this your last, best
chance to refinance and save money with a super low rate?
Perhaps. Although rates have been on a near-steady decline for
nearly four years now, it's always been clear that rates wouldn't
stay this low forever. Then again, each time the experts said that,
mortgage rates responded by dropping even further.
Where are mortgage rates going?
So what's happening now?
Simply put, supply and demand. As the housing market and the
overall economy continue to recover, there's more demand for credit
throughout the economy. Not just mortgage borrowers, but investors,
commercial interests and institutions are more interested in
borrowing money, and are willing to pay higher rates to do so. That
drives up interest rates across the board.
A growing economy often brings with it higher rates of inflation
as well, so lenders charge more so the returns on their loans keep
ahead of the rate of inflation.
So if the economy and housing market continue to gain steam
through 2013, it's a good bet mortgage rates will rise as well. In
fact, that's the general consensus from most observers, although
it's worth noting they've been very wrong before.
On the other hand, if last quarter's 0.1 percent dip in the
gross domestic product (GDP) turns out to be more than just a bump
in the road created by the fiscal cliff, rates could stall out
How'd they get so low?
The reason mortgage rates are as low as they are is because the
Federal Reserve has been working hard to get them there. Beginning
in 2009, the Fed began a series of actions to drive down mortgage
and other lending rates by buying up mortgage bonds and Treasury
notes, essentially creating a flood of cheap credit. Each time they
announced a new round of "qualitative easing," rates took another
The Fed has announced that it intends to keep rates low through
2015, so mortgage rates aren't going to go flying through the roof
anytime soon. However, there's a fair amount wiggle room in the
definition of "low." Rates on 30-year mortgages could rise well
into the 4 percent range and still be considered very low by
Should you act now?
What it comes down to is, you can't count on rates remaining
this low much longer. If you haven't refinanced already, chances
are it's because you're waiting for something to change. Maybe
you're hoping your home will rise in value. Maybe you're waiting
for your credit score to improve, or are trying to pay down your
loan enough so you'll have more equity and qualify for a better
rate. Maybe you already refinanced a year or two ago and are
debating whether to take one more shot before rates head back
If you're waiting for your credit or home equity to improve, you
may not be able to refinance right now anyway, unless you can take
advantage of a program like HARP (Home Affordable Refinance
Program), which is designed for low-equity and underwater
On the other hand, if you think you can get a significantly
better interest rate by waiting for your credit or home equity to
improve, it might make sense to keep waiting and watching - as
noted above, the Fed plans to keep rates on a fairly short leash.
But if rates rise by half a percentage point over the coming year,
you could find your opportunity is gone.
Mortgage rates are unpredictable. No one really knows exactly
where they're going to be six months down the road. All you do know
is where rates are today and whether refinancing right now would be
an improvement over your present mortgage. That's all anyone can
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