It’s 2014 – so why aren’t rates higher?

You may have noticed a trend in the last month or so of interest rates actually declining. Despite economists predicting that they will rise steadily, and keep rising, all through 2014, they haven’t so far. A 30-year-fixed mortgage is somewhere around 4.5 percent right now, and has been since the holidays began. However, let’s not throw a party just yet. The reason economists predicted the rising interest rates is that the Federal Reserve will slow down it’s $85 billion monthly bon program, which is what has been artificially keeping rates low. As soon as the Federal Reserve hinted that they might stop this program, the rates began to rise in anticipation. The real changes in the program didn’t begin until December of 2013.  This month, February 2014, it will probably slash the program by $5 billion, yet rates haven’t risen so far these past few weeks as a result.

Mortgage rates will always increase with an improving economy and a real estate and stock market recovery. It looks like we’re on our way out of that 2008 recession and things are getting back on track, including interest rates, which were much higher than they are now at the peak of the real estate bubble in 2005. We’re lucky that rates aren’t going to rise too quickly. We can plan and predict, and that’s good. Also, since less buyers qualify for loans as rates go up, lenders tend to be less strict about their lending guidelines, which compensates and prevents buyers from being left out of the industry’s growth.


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