Reproduced with the permission of Mortgage-X.com
By nearly all accounts, it seems the downward plunge in the interest-rate roller-coaster ride has finally begun creeping upward again for good (at least, for now). The all-time low mortgage rates over the past five years have pumped enough lifeblood into the housing market that even whispers of the Fed's decision to stop its bond-buying program triggered rate jumps. The Federal Reserve has been pumping $85 billion a month into the financial sector since 2008 in an effort to jumpstart the U.S. economy, but this was only meant to be a temporary fix to rejuvenate the market.
On Wednesday the Fed announced it would begin "tapering" its quantitative easing program - reducing its monthly bond purchases to $75 billion a month. The idea is to ease the market off the stimulus gradually, as unemployment decreases and inflation rises. The increase in mortgage rates over the past six months reflect growing confidence in the economy and housing recovery, indicating that borrowers can perhaps afford an extra percentage of interest on their home mortgage.
As a result, the number of borrowers looking to refinance into new mortgage agreements has leveled off. But a look back at where rates averaged even two years ago show that plenty of borrowers could improve their footing by locking into new mortgages. A rate of 4.5 percent could save you hundreds of dollars a month compared to a 6 percent rate - a typical rate for just a couple of years ago. Contrast that to what homeowners paid in interest 20 or 30 years ago, and 2013 rates seem like a downright steal.