Interest Rates May Rise in 2015

Posted by Carolyn A. Capalbo on Tuesday, November 11th, 2014 at 8:45am.

Christopher Siegel of Propsperity Home Mortgage provided me with this interesting article.  I am posting this with his permission on my Blog for you all...Carolyn

Rates May Rise in 2015 -  As expected, the Federal Reserve has confirmed that it would end its bond-buying program known as Quantitative Easing (QE).  QE is economist lingo for the Federal Reserve purchasing of bonds to lower long-term interest rates.

So what does this mean?  Ending QE isn’t “putting on the brakes.”  It’s just easing off the accelerator.  Rates will not shoot up by 1% overnight.  The Fed’s bond holdings will naturally shrink over time as bonds come due.  This will put pressure on the Fed to raise short-term rates by the middle of 2015 and long-term interest rates will follow.  Many analysts predict this will cause mortgage rates to rise from 4.1% today to about 5% by the end of 2015.  This could cause considerable short-term volatility in rates as the Fed moves along this path, particularly because there is no longer any steady buyer in the market for mortgage-backed securities (MBS), with both the Fed and the government-sponsored enterprises shrinking their role within the market as investors.

So what is the message to our clients? It is time to buy and/or sell your home NOW!  The next six months may be the last window of opportunity for your clients to take full advantage of today’s low rates for some time.  How does this affect buying power?

Carolyn Capalbo,
Northern Virginia REALTOR®

 

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1 Response to "Interest Rates May Rise in 2015"

Christopher Siegel wrote: Thanks for getting this message out. It's amazing to see how a future increase in interest rates would affect one's buying power. Rates can't stay this low forever. This is a great time to buy!

Posted on Tuesday, November 11th, 2014 at 12:38pm.

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