Where will Mortgage Interest Rates go in 2011?
We’re starting this year off the all-time lows of last November. We’ve seen bond prices decline dramatically since then which has caused interest rates to trend upwards. Most experts believe that those low rates are now behind us and will be for a long while.
In fact, there are only two scenarios that could bring rates back to where they were in November, 2010:
1 – It’s a long shot, but if the Fed’s latest round of Quantitive Easing fails to meet it’s goal of increasing inflation, improving the job market, boosting the stock market and creating consumer demand. If the threat of deflation reemerges, this would cause bond prices to make some gains and that would ultimately lead to lower Mortgage Interest Rates.
2 – If the economies of the countries in Europe (ie. Ireland, Spain, Greece) continue to worsen that would cause investors to put their money back into the safe haven of the US Bond market.
The truth is that the economy is improving but not at a pace that will put a lot of pressure on rates to rise too dramatically. Most experts expect that rates will stay relatively low for the first half of the year and then will begin to rise gradually. By the end of the year, Mortgage Interest Rates should be in the 5% – 5.5% range. If that holds true, that would make 2011 the third best year for rates just behind 2009 and 2010.