Posted by Collette | Posted in Home Mortgages | Posted on 25-02-2010
Mortgage rates are rising as the markets believe the Federal Reserve will raise the interest rates higher. Rates on 30 year mortgages are predicted to raise 0.50 to 1% by the end of this year. This is the highest rates we have seen in the last couple years.
Some analysts believe that new home sales will decline as the interest rates rise. But as economic conditions improve and business activity improve we are also susecptible to inflation. Kansas City Fed President Thomas Hoenig argued at the Fed’s most recent meeting last month that the promise of low rates risks creating new bubbles in financial markets and lays the groundwork for unacceptably high inflation. He suggested that raising the federal funds rate “modestly higher” soon would lessen those risks. But raising these rates will put pressure on home mortgage interest rates.
Leading economists are upbeat about the U.S. recovery, forecasting steady growth over the next two years as businesses grow and jobs return. Manufacturing is improving at a slower pace. Retail Sales have steadily increased. Economists believe improvement in sales and profits will cause companies to put out the hiring signs relatively soon.
As jobs return, so will consumer spending, which should rise by 2.2% in 2010 and then climb 2.8% in 2011. These relatively small gains can be attributed to the fact that Americans are still feeling financially conservative. Overall, economists believe we are on a fairly healthy growth track and there will be no double dip recession.
I am hoping the market recovery continues and we avoid more economic slowdown and inflation.
