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Mortgage rates on the rise, according to Freddie Mac

According to predictions from a number of economists, interest rates have hit bottom and will gradually rise as the housing market and overall economy recover. If you are waiting to purchase a home or refinance your mortgage because the interest rates might go even lower, you may have missed out. The average rate for a 30-year mortgage hit record lows in February of this year and rose above 4 percent for the first time since last October.

Government backed mortgage giant Freddie Mac predicts the 30-year rate will reach 4.5 percent by the end of 2012 and by late 2013 residential real estate mortgage rates will hit 5 percent. The average rate last week was just under 4 percent. A mortgage executive at one of nation's largest lenders, and Massachusetts' biggest bank, said that historically speaking, rates are still extremely low. Over the last two decades rates have averaged close to 7 percent.

As the U.S. and European economies recover from the world financial crisis during the last four years, more investors are shifting their investments from low-risk treasury bonds to higher risk investments with better returns. Treasury bonds are sold when the U.S. needs to borrow money. Because mortgage rates are linked to the U.S. Treasury bonds, which fluctuate with the economy and world markets, the U.S. has had to offer higher returns on treasury bonds to entice investors into buying them. The result is higher interest rates for mortgages and other loans linked to government secured bonds.

After hitting a record low of 3.87 percent in February, 30-year rates began gradual rise to 4.08 before settling back down to 3.99 percent last week.

Mortgage executives and economists say the improving stock market, falling unemployment and the rise in consumer confidence could counter the increased mortgage rates by encouraging people to spend money on a new home. According to the chief economist at Freddie Mac, the higher rates will have a small impact on housing demand thanks to the stronger economy.

Today's lending environment and record foreclosure actions can make it difficult to know what the best options are if you are considering refinancing your residential mortgage or buying a home. Consult with a residential real estate attorney who can help you sort out the market conditions and guide you through the best strategy for accomplishing your goals.

Source: Boston.com, "Mortgage rates may have struck bottom at last," Todd Wallack, April 1, 2012

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