If you’re still waiting for mortgage rates to plummet even further than they have since the mortgage meltdown you may have missed that bottom. After falling to the lowest point below 4 percent in February the cost of a 3o-year mortgage rose above 4 percent for the first time since October 2011.
Economists predict that rates will gradually climb as the economy and housing market continue to recover from the great recession. Government-backed Freddie Mac in the meantime predicts rates will climb to 4.5 percent by the end of 2012 and then 5 percent by early 2013.
Rates are expected to climb on new home purchases and re-finance offers.
Experts believe the housing market can sustain increases in the cost of financing a home at this time because of strong stock market, more jobs entering the marketplace and consumer confidence which is at its highest number since 2008.
While rates may be increasing it should be noted that they are still far behind a two decade average of 7 percent.
Rates are expected to rise because they are tied to US Treasury bond which rise in price based on the economy and world markets. US Treasury bonds are considered a safe haven so when a large number of investors started pouring their investments into those bonds 4 years ago it drove down the interest rates they would earn, thus helping lower mortgage rates. Now with the stock market doing well investors are pulling out of US Treasury Bonds which has forced those interest rates earned to increase in order to entice buyers.
Mortgage rates have increased from a record low of 3.87 percent in February to a high of 4.08 percent in late March. Last week rates sat at 3.99 percent.
In any respect it look like many refinances have already occurred well before the increase, according to the Mortgage Bankers Association refinancing volume has fallen by 24 percent over the last six weeks.