 Forecasts for Mortgage RatesTuesday, February 7, 2012 - Article by: SUZIBOYLE -
Mortgage rates across the board are at historic lows. Everything, from 1-year adjustable rates to 30-year fixed rates, is lower now than it ever has been in most people's experience. However, there are gaps to consider. The 15 year mortgage is at 3.2 percent while the 30-year can be obtained at 3.9 percent, a difference of 70 basis points. The 5 year hybrid ARM is 2.8 percent. The 1-year ARM is of no value since it is also beign quoted at 2.8 percent. The 5 year hybrid option is best for those who are fairly sure they will be moving within the next 5 years. Ona $ 200,000 mortgage, the 5-year hybrid monthly payment will be $ 822 with the remaining loan balance at $ 177,200 in 5 years. By contrast, the 30 year mortgage will require a $ 943 monthly payment with the principal balance at $ 180,600 in 5 years. For those who are less sure they will be moving within 5 years, the 30 year mortgage will provide the ultimate security of a constant, fixed monthly payment. Both the short term and long term interest rates are likely to be higher in 5 years.That is, according to most economists' forecasts. the latest Blue Chip consensus is calling for a rise in all interest rates by the middle of 2013, though moderately. So the 5 year hybrid rate could lead to mortgage payment shocks from the 6th year when the ARM adjustment kicks in. The Blue Chip consensus expects the 30 year fixed rate to average 4.4 percent (from its current 3.9 percent) by the middle of next year. I personally expect that the rate could be closer to 5 percent by then because I am expecting a higher overall inflation rate than most other economists. |
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