If you are looking to purchase a home in the near future, watch the mortgage rates. Due to the Federal Reserve buying up mortgage paper and a severe recession we have enjoyed historically low mortgage rates recently.
That all might change.
And with this change the cost of housing may rise.
If rates do go up sharply, that will have a big effect on home buyers. Richard Redmond, a mortgage adviser at All California Mortgage in Larkspur, Calif., offers the example of a couple with combined pretax income of $100,000 a year and debt obligations (excluding mortgage) of $500 a month. At a 5% mortgage rate, he figures, the couple could qualify for a loan big enough to buy a $590,000 house, assuming a 20% down payment. At 6%, that would fall to $540,000.
Since late 2008, 30-year fixed-rate mortgages have been available for people with strong credit records at around 5%, near the lowest levels since the 1950s, thanks to the Federal Reserve’s heavy purchases of mortgage securities. At the end of March, the Fed is due to stop buying the securities. Most mortgage analysts think the immediate effect of the Fed’s withdrawal will be modest. via WSJ.com
The net effect will be additional downward pricing pressure on homes. Not the news we want to hear.
