Home interest rates are near historic lows at the moment, but have started to slowly increase since last year when they were at an all-time low. For the past few months, interest rates have been steadily rising and, while a huge increase is very unlikely, so are further decreases.
Mortgage rates today for a 30-year fixed-rate mortgage are around the 3.5 percent mark, an increase over the November 2012 rate of 3.31 percent. Rates for a 10-year fixed-rate mortgage are hovering around 2.60 percent, staying near the historic lows reached last year.
Rates are expected to go over 3.75 percent by the end of 2013, and maybe even reach 4 percent. This increase will affect homeowners who wish to refinance more than they will affect people who are looking to buy a home. This rise in mortgage interest rates will make buying a home more expensive, but it isn’t expected to slow down the housing market recovery.
Factors Contributing to Increasing Home Interest Rates
During the past few years, the Federal Reserve has purchased bonds for hundreds of millions of dollars, which keeps the mortgage interest rates low, in order to attract more consumers and investors. The result was an increase in refinances, but it hasn’t generated as many home purchases as it was expected.
The main factor that will contribute to increasing home interest rates is the economic growth. Along with economic growth, there will be a decrease in unemployment rates, an increase in new construction and home prices, which will stimulate the housing market to grow, and mortgage interest rates will rise.
At the end of last year, a 7.8 percent unemployment rate was recorded, the lowest since 2009. As more and more people get jobs, many of them will want or need to relocate, so the real estate market will see more buying activity.
Builders are also recovering from the economic recession and are starting to build more new homes, as the demand increases monthly. It is expected that new homes construction for single families will see a 20 percent increase compared to 2012, and multi-family homes a 15 percent increase over last year.
The steady increase in home prices helps the economic growth, therefore being a contributing factor to the rise in mortgage interest rates. Statistics show that home prices have seen a 10 percent increase between 2011 and 2012. Mortgage loan requirements are still pretty strict, but it is still expected that there will be more home sales in 2013 than there were in 2012.
The economy is expected to only grow by 2 percent this year, so the mortgage interest rates increase won’t be so extreme. The economic growth should be a warning sign for all those who wish to buy a home while taking advantage of the near record low interest rates. Unless an unforeseen event that will affect the economy occurs, such as a new economic collapse or war, the economy will continue to grow and even pick up the pace, so looking at the warning signs and being ready to buy will help you save a significant amount of money.