Mortgage Interest Rates - Will They Be Going Up Or Down

We are likely to see significant change in all areas of business and finance in the aftermath of the recent economic crisis. Considering that the US housing market was the main 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 would be less accessible in the future to those on limited incomes.

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

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

In addition to this, government policies to stimulate the economy by investing huge 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 individuals are investing in them which is increasing interest rates, that will be passed on to mortgages.

It is hoped, however, 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 a few homeowners though, particularly those 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 financial recovery is completed.

The people who are considering purchasing a home but are concerned about getting caught with higher monthly payments in the future may wish to consider taking out a fixed rate mortgage. Although this is usually regarded more costly than standard variable rate mortgages, you're protected by future rate movements by being locked in at a specific rate for a set period of time. This alternative would likely best suit the people who are considering purchasing a particularly expensive house on that the slightest rate change would cause a considerable increase in payments.

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