Are Mortgage Rates Increasing?

Consumers that have purchased or refinanced their homes at the historically low mortgage rates will be glad to know that they were able to take advantage of those mortgage rates before they disappeared. That is what is currently happening. Mortgage rates are now slowly increasing again. As of week ending February 11, 2011, the national average 30 year fixed mortgages are now 5.05%. Interest rates have not been this low since May 2010.

Mortgage rates are tied to Treasury yields, particularly the 10 year Treasury yield. The Treasury yield has been slowly increasing, so it's no surprise that the mortgage rates are increasing as well. Higher mortgage rates tend to affect people trying to refinance rather than people trying to buy a home because people looking to purchase a home are more concerned with other factors, such as the price of the home itself. Currently, home prices are still low enough that buyers will overlook the slightly higher interest rate.

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While fixed rate mortgages rates have risen recently, interest only loans are still available. When the mortgage crisis first began, one of the major causes was vairable rate or interest only loans readjusting to percentage rates that were never affordable for the homeowner. The interest only payment was far less than what the fully amoritzed, principal plus interest, payment each would be. Interest only loans and variable rate mortgages are still available though. You may have heard radio commercials from various loan companies trying to sell interest only loans. The sales pitch is that why pay higher interest and a higher payment if you do not want to stay in the house you buy for more than five years. While this marketing strategy sounds unsound, in some places buying a house with little down and an interest only mortgage can be less expensive than renting an apartment or home.

At the end of the day, each person must evaluate what is their best financial decision. We are still in uncertain times given the state of the economy and the number of houses that are banked owned. Many banks are not releasing homes yet. Once they do will home prices continue to fall? What will happen to interest rates then? Will interest rates continue to rise, or will interest rates decrease to allow more people the ability to purchase these foreclosed homes? These are uncertain times regarding mortgage interest rates and the sale of homes.

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