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Last Chance to Get a Mortgage Rate Under 4%?


At the start of each year, the financial pundits weigh in on the direction of many things for the 365 days that lie ahead, including mortgage rates.

And seeing that rates began 2013 at near all-time lows, the obvious (and conservative) prediction is to say that rates will rise.

Most individuals also seem to believe rates will rise, again, because they’re currently so very low and hard to believe.

In fact, the mood for mortgage rates over the past few weeks has been decidedly negative, as if the party is finally over.

But a recent article from The Street titled, “It’s Last Call for Mortgages Below 4%,” seems a bit dramatic.

Interested Parties Creating a Panic?

In the post, National Association of Realtors (NAR) boss Lawrence Yun thinks it “may be [the final] once-in-a-lifetime opportunity” to snag a mortgage below 4%.

Notice the “final” bit, as if there were multiple once-in-a-lifetime opportunities here…

Yun predicts rates on the 30-year fixed will climb to 4% during summer, and 4.5% by the first half of 2014.

He attributes the rise in rates to inflationary concerns, sparked in part by the Fed’s “easy money policies.”

MBA’s Vice President of Research and Economics Mike Fratantoni also weighed in, predicting a 30-year fixed mortgage rate around 4% by late June, and 4.6% before 2015.

To sum it up, the heads of a bunch of real estate agents and mortgage bankers believe rates will rise a percentage point or so in the next year and change.

In other words, buy a home or refinance now before it’s too late!

We’ve Heard These Predictions Before

Unfortunately, this isn’t the first time the pundits have predicted a rise in rates, only to be 100% wrong.

The last couple years, pundits predicted higher rates and wound up eating their hats as rates slipped to new all-time lows (I too was wrong…).

So who is to say they won’t repeat history and get it wrong again? Is a 30-year fixed mortgage rate below 3% really that far out of reach?

A couple of Fed researchers believe mortgage rates are artificially inflated by lenders because of capacity constraints, meaning there’s room for them to fall or at least stay put.

My prediction for 2013 calls for sideways action with plenty of ups and downs, and perhaps a gentle rise. But nothing substantial.

Waiting May Benefit You

While the interested parties might make it appear as if the end is nigh, good things could come to those who wait.

The latest weekly mortgage rate survey from Bankrate was titled, “Mortgage Rates Climb to 4-Month High.”

Their survey said the 30-year fixed averaged 3.67% during the week ending January 10, up from 3.58% a week earlier.

For the record, a four-month high isn’t saying a whole lot when rates were hovering near record lows.

Additionally, the company believes the “euphoria” post-fiscal cliff will fade, and bring bond yields down with it (which means lower mortgage rates for consumers).

There’s also the impending “debt ceiling,” which is the latest economic freak-out, the unresolved and strangely quiet Eurozone crisis, ongoing domestic unemployment concerns, and an all-around unsettled economic picture.

Take that all into account and you have to wonder why mortgage rates would suddenly increase just because it’s 2013. Surely the Fed wouldn’t allow a rapid rise in rates in such an uncertain and fragile environment.

Heck, those who wait to buy a home may even get the gift of a lower purchase price along with a lower mortgage rate.

Assuming rates do encounter upward pressure, spreads between yields on mortgage-backed securities (MBS) and primary mortgage rates may normalize (shrink) as lenders finally get competitive with one another.

Read more: Is a 30-year fixed in the 2% range possible?

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