After a recent spike seen in mortgage rates, some consumers are wondering whether they’ve missed their chance to refinance into an ultra-low rate. Fear not: While the conforming 30-year fixed-rate mortgage hit a daily average of 5.81% last Thursday 06/18/09, it averaged 5.53% on Tuesday06/23/09, and it’s possible that rates could continue to fall. Predicting interest rates is like predicting who is going to win the World Series in January,I feel the recent spike is somewhat of an aberration, I expect rates will continue to drift down.
Why the recent run-up in rates? Over the past month or two, the economic skies have brightened somewhat, and the threat of trillion-dollar budget deficits for the foreseeable future, the potential for significant inflation, and few clues as to how the government might extricate itself from intrusions into markets created a landscape that was not appealing to investors.
Now, rates are retreating partly because inflation doesn’t seem as immediate as investors feared. In my opinion, nothing fundamentally has changed in the economy over recent weeks to warrant the rate rise, yet he expects volatility through the remainder of the year as investors debate the economy’s health. Realistically, I think that the rates will drift under 5% again. It may take a month, may take two months.
It’s also important, however, to realize that extremely low rates likely won’t be around forever. Luckily, we have seen rates drop some this week, which should help many consumers breathe a little easier. But the fact remains, the government’s plan of purchasing mortgage-backed securities cannot go on indefinitely, and when it ends, we will most certainly see a spike in rates. The hope is that the Fed can keep rates low long enough to kick-start a housing recovery. Whether that will work remains to be seen.
