by Jaime Beus Kinman, Guaranteed Rate
Where will home loan rates go during 2010 and why? Rates are going to be higher in 2010. There will be more supply coming to the market in the first quarter, while the Fed’s purchase of mortgage backed securities will be winding down. They pledged over a year ago to purchase $1.3 Trillion which has kept rates low with demand high. In fact rates are about 1% lower than they would be if they weren’t participating in the purchasing program.
Once the Fed’s Mortgage Backed Security buying program has expired at the end of March, it is likely that rates will edge higher still towards the summer. Eventually, supply will decline as origination volume slows- and mortgage rates stabilize. But if there are hints that the Fed will be looking to hike rates (such as Fed Funds rate which drives the prime rate which affects revolving debt, car loans, the rate at which businesses borrower, etc), thus signaling the end of the carry trade, mortgage pricing will significantly worsen. The range for rates during 2010 is wide, with the lower end just above 5% toward the beginning of the year. The upper end of the range could be as high at 6.5%, with rates being very volatile throughout. It is typical to see prices worsen more rapidly than they improve…. but 2010 will exaggerate the characteristic, with pricing losses coming far more quickly and sharply than pricing improvements. If you haven’t taken advantage of the low rates to either purchase a home or refinance, you may want to consider doing it this first quarter or two of the year as the rates seen in 2009 may not be seen again.
With rates going up it is especially important to pay attention to the possibility of receiving a tax credit for first time home buyer’s of $8000 or $6500 for current homeowners who are moving up. For more information please contact me or IRS.com for more information on how it may apply to you.
The forecast for 2010 is challenging and realistic. It is important to work with a professional who knows what is going on in the credit markets, and educates you on what program is best suited for you and your family. I would be happy answer any questions you may have and would love the opportunity to work with you.
Jaime can be contacted at 480-206-3959.