Thirty-year fixed mortgage interest rates forecasted to rise above 4% in 2013 Reply

Now may be a good time to commit to buying a home in the Pioneer Valley and get locked into today’s historically low interest rates as economists are starting to forecast that 30 year fixed mortgage interest rates will rise above 4% in 2013.

In an article in TheStreet.com, the economists for the National Association of REALTORS® (NAR) and the Mortgage Bankers Association (MBA) stated that the interest rates will start to rise in 2013, but offer different forecasts as to how much they will rise.

NAR economist Lawrence Yun was reported as saying that he predicts that mortgage interest rates will hit the 4% mark this summer and reach 4.5% in early 2014. MBA economist Mike Fratantoni predicts that the average interest rate will hit 4% by the end of June and rise to 4.6% before 2015.

Yun said that the reason for the mortgage rate increase is because of increased risks of inflation as the economy continues to grow. He explained that the increased risks of inflation can be seen with increased rental rates Yun said that rental rates are an important part of how the Consumer Price Index (CPI) is calculated, which measures inflation.

“Higher rents will push up CPI, and higher inflation will mean higher interest rates for consumers as lenders try to make a profit,” Yun told TheStreet.com. “My forecast is that higher inflation will force banks to charge extra interest to compensate for the loss of purchasing power in the money that consumers borrow.”

Thirty-year, mortgage interest rates fell below 5% for the first time in 2009.

If you are planning on buying or selling a home in the Pioneer Valley, make your first call to Michael Seward at 413-531-7129.

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