Home > Mortgages > Mortgage Rates in 2nd Quarter 2010 Expected to Rise

For a long time, interest rates have been at its historical low. Interest rates as low as 4% for 15-year notes and lower than 4.5% for 30-year notes. It had made it a terrific environment for home buyers who are benefitting from low and attractive home sale prices, the low interest rates (long-term commitment to lower monthly payments) as well as the home buyer tax credits offered to first time home buyers as well as repeat buyers who qualify.

So are you planning to participate in this opportunistic home buying environment? Are you financially and emotionally ready for homeownership?

One thing you should be aware of is the interest rates. It is projected that interest rates "may" hike after end of March 2010 because the mortgage-backed security (MBS) is set to expire then.

How does that affect you as a home buyer who plans on getting a home mortgage on the purchase?

A mortgage-backed security is an asset-backed security (typically residential properties) that the mortgages are guaranteed by a government agency for principal payment and guarantee of timely payments. Typically, guarantees of these MBSes are Ginnie Mae, Fannie Mae and Freddie Mac. These federal programs help provide support to the mortgage and housing industries to keep interest rates low and affordable for everyone.

$1.25 trillion is set to expire by the end of March which has been credited with keeping mortgage interest rates at new historical lows. According to projections, the 30-year fixed rate mortgages may rise from an average of 4.9% to 6.1% at the end of March, then to 6.3% by the end of 2011 and 6.6% by the end of 2010. Again, these are just projections. So, don't panic if you haven't locked in your interest rates just yet.

The good news is that we have some history to say that if the interest rates hiked too much and creates a market discomfort, the Federal Government would then re-consider their purchases. But if recovery is on its way, the Fed may begin to seize purchasing these MBS.

There is no free lunch. In some of these mortgage products, there are some changes to the loan guidelines that will result in costing the borrower more in obtaining the loan. In the Open Market Committee meeting, 12 out of 15 members plan to extend the MBS purchase in mid-December. The minutes of mid-January is not published yet and there is one more meeting coming up before the MBS is officially set to expire.

Stay tune on more mortgage updates about these MBS that are set to expire.

Related Articles:
 

• When to Lock In Rates?
• New Standardized Good Faith Estimate for 2010
• 100% Home Loans
• Time Value of Money in Closing Costs
• Two Halves Make a Full Loan Approval