Will The Mortgage Interest Rates Be Going Up Or Coming Down

In the aftermath of the recent economic crisis, we are likely to see significant 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 could be less accessible in the future to those on limited incomes.

Though lenders and government organizations such as Fannie Mae have already tightened laws regarding 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, 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 is soon set to change. The Federal Reserve has already stated that it would now buy fewer and fewer of these securities, which is essentially people’s mortgages bundled together, and eventually their buying 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 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 massive 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 that is increasing interest rates, which will be passed on to mortgages.

It is hoped, however, that mortgage interest rate increases will not be too great and 6% is forecast by this year's end. Even a little increase can spell trouble for a few house owners though, particularly those who purchased with a variable rate mortgage before the crash when home rates were still high. What happens beyond that depends a lot on how the housing market and the economy perform in general and whether or not the economic recovery is completed.

Those who are considering purchasing a house 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 often 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 length of time. This alternative would likely best suit those who are considering purchasing an especially costly home on that the slightest rate change could cause a considerable increase in payments.

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