Mortgage Interest Rates - When Will They Go Up?
Print View - Published: Sun, 16 Jan 2011 at 12:12 AM
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The prices generally decrease when the demand for a particular service or product is less, to encourage sales. The same can be said for loans and when the housing market isn't looking especially strong, mortgage rates tend to decrease to promote potential house owners to purchase.
Additionally, financial institutions look to market data like unemployment and the stock market performance when gauging their rates since they give an indication of how much individuals could afford to pay. Clearly, any lender or financial institution would like to maximize their profits however setting rates too high would deter prospective buyers meaning that business is lost.
With markets all over the world still reeling from the global economic crisis, many indicators suggest people not having the ability to afford particularly high rates, so mortgage rates are presently less to accommodate for the financial climate and encourage sales. The persons who are lucky enough to be able to take advantage can do so as not only are the actual house prices less, the repayment rates are also low. When mortgage rates are low it does not just help the buyer during the period that the rates are low but even in the long term because more of the principal capital of the loan is paid off during that period.
Ultimately, the housing market will bottom out and prices would become stable. Incentives like the first time home buyer tax credit can give a boost however it has been revealed that this boost is only temporary. When house prices do become stable, then prospective buyers are more likely to go ahead with a purchase since they're less likely to see their investment decrease in value and more likely to see a profit. Additionally, a stable housing market would indicate a more stable economy which would mean that more persons have enough confidence in their finances to go ahead with a purchase.
This improved liquidity and confidence will improve home sales and several people would look to get into the market when prices are low to maximize their future profits and get the best possible home for their money. With an improving housing market and more money being spent, economic institutions would acknowledge that individuals could afford more money again and raise their rates correspondingly.
What is more is that the government is currently striving to keep rates low so as to help the housing market the best it can. When the government feels that the economy and housing market is strong enough then they will loosen their influence on the markets, allowing rates to rise.
Many persons feel as though the housing market should simply be allowed to reach its bottom level if it is to eventually make progress. It is thought that incentive programs like the first time home buyer tax credit are merely prolonging the recovery rather than speeding it up. With house prices still falling and unemployment figures low, it's a while yet before we can expect to notice mortgage rates increase so those who are looking to benefit from the low rates still have some time to do so.
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