2/10/11
The Obama Administration has considered the option of privatizing Fannie Mae and Freddie Mac entirely, according to this article. If it did, many economists believe mortgage rates might increase by as much as 2% almost immediately.
It’s unlikely that the administration will choose this course of action. But either way, there’s no question that a sudden, significant increase in mortgage rates would prevent some borrowers from taking out loans and keep the housing market stuck in a nonperforming role. Home prices might be pushed lower by such action.
It seems that mortgage rates are increasing on their own and may end up higher than many economist’s predictions by the end of this year. Frank Nothaft, a chief economist with Freddie Mac, says health in the private job sector is responsible for the recent rate uptick.
"For all 2010, nonfarm productivity rose 3.6%, the most since 2002, while January's unemployment rate unexpectedly fell from 9.4% to 9%. Moreover, the service industry expanded in January at the fastest pace since August 2005," Nothaft said. "As a result, interest rates on a 30-year, fixed-rate mortgage rose to the highest point since the last week in April."
Where are rates? Currently, 30 year fixed mortgages are commanding rates of 5.05%, a level unseen in many months. 15 year fixed rate mortgage rates are up to 4.29% from 4.08% a week ago, a significant increase.
Regardless of what the Obama Administration decides to do with Fannie and Freddie, the implications are clear. Mortgage rates are starting a long climb back upward. If you’re planning to close a loan, do it now.
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