Will The Mortgage Interest Rates Be Going Up Or Coming Down

In the aftermath of the recent economic crisis

, we are likely to see considerable change in all areas of business and finance. Considering that the US housing market was the chief catalyst for the credit crunch, it has understandably been the focus of much attention and target for criticism. The US housing market is one area that can be less accessible in the future to those on limited incomes.

Although lenders and government organizations like Fannie Mae have already tightened laws relating to who can and cannot qualify for a mortgage, this is not the only reason that there would be fewer home buyers in the future.

Since the crash, the U.S. government has been pumping literally trillions of dollars into the housing market by buying mortgage backed securities that has kept mortgage interest rates artificially low, but that is soon set to change. The Federal Reserve has already stated that it would now buy fewer and fewer of these securities, which is actually individualss mortgages bundled together, and eventually their purchasing of these securities will taper away altogether. What this will do is hand the market completely back to the private investor and the private investor will want to see a greater return on their investment.

In addition to this, government policies to stimulate the economy by investing enormous sums of money have left the treasury with colossal debt and this debt is even a potential threat to the economic recovery. Recent U.S. bond auctions show that fewer people are investing in them which is increasing interest rates, which would be passed on to mortgages.

However, it's hoped, that mortgage interest rate increases won't be too great and 6% is forecast by the end of the year. Even a little increase would spell trouble for some house owners though, particularly people who purchased with a variable rate mortgage before the crash when home costs were still high. What happens beyond that depends a lot on how the housing market and the economy in general perform and whether or not the economic recovery is completed.

Those who are considering purchasing a home but are concerned about getting caught with higher monthly payments in the long run might wish to consider taking out a fixed rate mortgage. Though this is typically regarded more expensive than standard variable rate mortgages, you are protected by future rate movements by being locked in at a specific rate for a set time period. This option would likely best suit those who are considering buying an especially expensive home on that the slightest rate change could cause a substantial increase in payments.

Whatever your credit status and regardless of the income range that you fall into, one must constantly be aware of the possibility that in the long run you'll probably be expected to have increased monthly repayments in the future for you to keep your home. Due to this it's essential to work within a range which provides room for maneuver or go for a fixed rate mortgage which protects you from changes.

by: Cory Boatright

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