How much do you predict mortgage interest rates could rise over the next 12 months?

[jimmyrules712]

I'm trying to decided when to buy a home. I originally thought I'd save until early next year, but if in the next 12 months interest rates rise as much as 1% then the extra money I would have towards the down payment would not lower my monthly mortgage payment any compared to buying with what I have now.

I know there's no way of knowing where rates will be, but those who are wiser then me can probably make a more accurate prediction.

Thoughts?

[JoshuaHeckathorn]

I'll take a guess- average rate for a 30-yr. fixed will be 5.5- 5.75% by summer. Right now you can lock in at 4.75%, which I just did yesterday for a 30-yr. fixed.

[disneysteve]

1. Nobody knows the answer to your question.
2. The answer to your question should have absolutely no bearing on when you buy a home.

You should buy a home when you are financially ready to do so and ready in other aspects - stable job, set to stay in that location for the long term, etc.

If you don't have a 20% down payment, you aren't ready to buy.
If you don't have a stable job and income, you aren't ready to buy.
If you don't have a 6-month emergency fund saved, you aren't ready to buy.

The interest rates may affect how much house you can afford but the rates don't affect when you are able to buy.

[jimmyrules712]

1. Nobody knows the answer to your question.
2. The answer to your question should have absolutely no bearing on when you buy a home.

You should buy a home when you are financially ready to do so and ready in other aspects - stable job, set to stay in that location for the long term, etc.

If you don't have a 20% down payment, you aren't ready to buy.
If you don't have a stable job and income, you aren't ready to buy.
If you don't have a 6-month emergency fund saved, you aren't ready to buy.

The interest rates may affect how much house you can afford but the rates don't affect when you are able to buy.

I have all of the above and am able to buy now. I was just going to save for another year because I'm not really in a hurry (the mortgage will be higher then my current rent). So with being in a position of being ready to buy and assuming I buy the same value house either way I'm trying to decide if long term my monthly payments will be lower buy buying at todays rates or saving for another year and buying at next years rates.

[bjl584]

1. Nobody knows the answer to your question.
2. The answer to your question should have absolutely no bearing on when you buy a home.

You should buy a home when you are financially ready to do so and ready in other aspects - stable job, set to stay in that location for the long term, etc.

If you don't have a 20% down payment, you aren't ready to buy.
If you don't have a stable job and income, you aren't ready to buy.
If you don't have a 6-month emergency fund saved, you aren't ready to buy.

The interest rates may affect how much house you can afford but the rates don't affect when you are able to buy.

I'm asking this question too, but not because I will be buying a home. I'm asking because of a REIT that I've been looking into purchasing. It's tied to government backed mortgages (Fannie Mae, Freddie Mac), and when rates rise the fund will take a hit. I've been speculating my window of opportunity to jump in and take advantage of the high dividend yield. I'm not sure what OP's motivation was as to asking that question, but that's why I'm wondering.

But, OP, if you are wondering about interest rates in an attempt to time your home purchase, then I agree with Steve. Buy when you are ready, not simply because rates are low.

[disneysteve]

I have all of the above and am able to buy now. I was just going to save for another year because I'm not really in a hurry (the mortgage will be higher then my current rent). So with being in a position of being ready to buy and assuming I buy the same value house either way I'm trying to decide if long term my monthly payments will be lower buy buying at todays rates or saving for another year and buying at next years rates.

Gotcha. So the question is if your additional savings for a larger downpayment would offset a higher interest rate. I would sit down with an online calculator and run the numbers for a variety of scenarios. Do it for today's rates and your current downpayment as your baseline and then adjust the variables based on your anticipated savings rate and various changes in the mortgage rate.

What do I think? I wouldn't be surprised to see rates a point higher a year from now.

If you are ready with your downpayment today and know what you want and where you want it, I would buy today and lock in current rates. Even if you can sock away a significant amount over the next year, would you put down more than 20% or invest that money elsewhere?

[jimmyrules712]

Even if you can sock away a significant amount over the next year, would you put down more than 20% or invest that money elsewhere?

This is a very good point. Thank you!

[wincrasher]

Right now you have alot of contradictory trends.

There is still downward pressure on rates because there is alot of cash floating around. With volatile world events and trouble with the Euro, Treasuries don't have to rise to sell and cover our deficits. Mortgage rates are tied to Treasuries.

There could also be lower rates if demand for houses falls. There are indicators of a double-dip in the housing market. With the unemployment situation plateuing where it is, there are not alot of people wanting to buy houses.

There are political forces at work too. If the deficit continues to climb, rates may need to rise. If Fanny and Freddie are shut down, then the whole mortgage market goes private and rates could rise.

So, if we solve the deficit, the economy heats up and world peace breaks out you could really see a spike in rates! But who cares, really. The world is ending in 2012 anyways!