What do you think interest rates will rise to this year and then next?

They will probably go down as the market tanks.....

Fixed Mortgage rates are not directly related to the prime rate nor the discount rate.  They are more a function of what is expected for inflation and what rates are expected for bonds and stock investements.

About the lowest I've seen in the past several decades has been a month or two ago, when speculation on the change in dollar exchange rate and the change in the Fed discount rate caused a stock market swing.  Fixed rates temporarily went below 5%.

I believe there will be several opportunities to lock at below 5% over the next couple years; but once the induced 10% inflation becomes clear, it will be hard to find any rates below 8%.  Likely, with inflation at 10 to 12% annual, the interest rates will go up to 12 to 14%.  But all lenders are very hesitant to rasing rates right now as they don't want the market to slow even more.  Not to mention, if they are extending teaser rates for ARM's, no one will fix at the higher rates.

As the FED continues to play with the money supply, there are just way too many variables to be able to accurately time the rate changes.

I should mention, under special conditions, some have been able to get fixed rates of 3%, no payment due until death.

Lol

Rates could go up again however...

On the other hand, they could go down....

Who knows...Debt Free, you've been doing this longer than I. Why have rates risen steadily since Friday, while the market gets slaughtered?

If anything, I think the answeris that mortgage rates have zero to do with the stock market, and more to do with the news that affects the market. No?

It depends on whether you are talking about short term rates, which much of wall street relies on, or long term, which much of the housing market relies on. I am hearing short term will stay down until the inflation dogs bark too much, but longer term rates are more likely to bottom near where they are now.

Maybe ask the poster above talking about 3% (kidding). Rates should hold consistant to a slight rise as we go into the summer months. With so many fewer lenders doing business it is having a negative effect on rates.

Thanks

Tony Grego - Indiana Mortgage Broker

As mentioned, the 3% is has only been available under special conditions; typically funded by a city, another government agency, or a non-profit.  They only offer it for needed repairs for houses owned by a senior that is unable to do the work themselves anymore.  The interest is added onto the lien against the house, no payments are made at the time.  The loan balance is paid at the time of death.

I've only known one person so far to get such a loan, and he has already died.  I do know the present owner of the house; there is presently no lien.

We have already seen a slight increase in rates; and I expect the rates to continue to rise as the lending instututions factor in expected inflation due to the devaluation of the dollar.

But there is also the competion factor and the need to write new loans to stay in business, thus any "shock" to the markets may allow one to lock in at a really good rate if one watches carefully and compares rates.

Mortgage interest rates are still historically low...but they will remain volatile throughout the year.  This is rather "uncharted" territory for the markets because we have had issues with liquidity, ratings from the bond insurers (Ambac, MBIA, etc.), and ;pss of confidence in the collateral that backs mortgage bonds over the past 9 months.  MBS traders are easliy spooked in these volatile times with inflationary concerns driven by the Fed's reduction in the benchmark rate, increased fuel costs, and the devaluation of the US currency market...so the instinct to "sell" can be quite strong after a day or two of positive gains in the market. 

In addition, the SEC regulation regarding short positions on stocks was changed this year...which adds volatility to the Dow on a daily basis...and since the Stock Market, Treasury Market, and Mortgage Backed Securities markets all compete for the same investor dollars, you are likely to see large "swings" in market prices throughout the year. 

Over the past month, we have seen a drastic increase (+.750%) in mortgage interest rates from their January lows...but rates are still hovering at almost the exact same level as last year at this time.  I believe the Fannie Mae Mortgage Backed Security is drastically undervalued at this point...but then again, I don't work on the trading floor of Pimco...so my opinion isn't of any real consequence.  One thing I can guarantee for this year, however: continued market volatility.

Pasadenan,

I will add one other point:  Inflation rates of 8%-12% will never happen again.  Currently, we hover between 2% and 2.5% year-over-year inflation rate.  The Fed's comfort zone is actually 2%.  As a result of the inflation craze of the late 1970's, the Fed will control inflation regardless of what the economy is doing.  If we see the core rate of inflation exceed 3%, you will see a Fed Preisent who take on an "economy be damned" position with regards to fighting the dastardly "I-word".

We will never see idiotic 10% interest rates again. You would drive down the price of houses to a point of insanity. Even an 8% fannie 30 year is NUTS.

So many people have 5 and 6 % mortgages, it would kill the banking world. You cant expect home prices to stabilize anytime soon if you add in the extra burden of 8% intrest rates.

Thanks to all of you financial wizs that help me feel better about the interest rate possibilities.  I appreciate reading all the different angles.  It helps me build a better picture of the situation.

ikwya...well, if you take the stance that  not even those who set the darned things can predict accurately, and that one wrong special interest group can gum up the works, you can't go wrong!