Are Refinance Mortgage Rates Going Up?

I really must say that we have been quite spoiled over the past year with mortgage refinance rates hovering near historic lows for much of the span. Unfortunately, on the other side of the coin, home loan qualification has become much more difficult. Throw in a dash of declining home market values and a pinch of “Full-Doc” only refinance program offerings and those low mortgage rates have been quite a tease for a good number of potential refinancing homeowners.

A big question that I get every day is whether or when refinance mortgage rates will be going up. I never predict where mortgage rates will go, especially on a short-term basis, but try to give input about major looming factors that can have a significant impact on refinance interest rates.

One of these major factors that could cause refinance mortgage rates to rise significantly in the near future is the end of the government stimulus program aimed at keeping mortgage rates low.

The Fed has been buying mortgage-backed securities, the bundling of home loans that are used to fund mortgage lending, since late 2008. But next month it plans to complete its purchase of $1.25 trillion in mortgages. This may have an immediate impact by causing a rise to the mortgage-spread premium, a direct component of mortgage rates.

The Fed will also be ending its buying of US treasuries next month, which could cause the yield on the 10-Year bond to rise. Since mortgage rates are based on this benchmark, they would rise in kind.

Yes, we’re talking about a potential double-whammy pop for mortgage rates next month.

The extent of the rise will be anyone’s guess, especially in light of the current housing and employment picture. Unstable employment and housing are major risk factors for mortgage lenders, and they do not like risk whatsoever. Some on the street are predicting a half-point increase while others have “guessed” 6.0 percent par rates on 30-Year Fixed mortgages by the end of this year. In my opinion, predictions are futile, but you can’t ignore the major headwinds in the market.

To compound issues, is the end of up to $8,000 in tax credits for homebuyers. To qualify, buyers face an April 30 deadline to sign a sales contract. Potential rising mortgage rates and no homebuyer incentive could put a severe drag on the housing market and home values.

One bit of good news is that home prices edged up in December, the seventh straight monthly gain. If the government comes in to save the day once again by helping to keep mortgage rates stable and by extending the homebuyer tax credit program, we could be close to a bottom in housing. One would think that the government would do something to keep the housing momentum going. They have done much to prop up the housing market, and it’s hard to believe that they will suddenly let the house of cards fall again.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

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