Mortgage Rates Headed Higher?

One of the most common questions I am asked on a regular basis is:

“Hey, are mortgage rates going to go up or down?”

To which I usually reply:

“Hmmm. I don’t know for sure, but they are going to do one of three things. They are going to either go up, go down or stay the same.”

And then I smile.

And the person that asks the question shakes their head and laughs because Captain Obvious just told them something without telling them anything.

However, this time – I am actually going to declare that interest rates are going to go up in the relatively near future. They might not go up tomorrow or even next week – but they will be going up, so if you are thinking about doing anything related to a mortgage, now is a good time to start the process.

Based on what happened last week when the Fed announced that they would buy up to $1.2 Trillion worth of mortgage backed securities and long term treasuries, I expect that at some point in the future, inflation will flare up (and possibly get out of control) which will lead to higher mortgage rates… possibly much higher mortgage rates.

So if you are thinking of buying a house, but are waiting for home prices to drop 5 or 10% more… be sure to factor in higher mortgage rates into your calculation – I think you will find that if home prices slide by 10% more, but interest rates rise by 2%, you might be better off in the long run locking in a lower interest rate and buying your home now.

Arizona Mortgage Rates for March 23 2009