Are Mortgage Interest Rates on the Rise?

There's been speculation for several months that mortgage interest rates will rise because 1.) they've been artificially low for some time and 2.) because the Fed can't continue to fuel our economy by buying our own mortgage-backed securities in mass. Typically, we depend on foreign and other investors to invest in our economy but with the recent downturn, there's been an effort by our our Fed to help our ailing economy by purchasing our own mortgage-backed securities, a move that many have predicted will cool down starting next month.

Last week, the Federal Reserve raised its discount rate, the rate at which banks can borrow money directly from the Federal Reserve. While at least one local mortgage banker tells me this move has very little immediate impact on rates, the action was viewed as the first step towards the removal of emergency measures to stem the economic downturn.

Also, Fed Chairman Ben Bernanke recently said that the Fed is likely several quarters away from raising rates and draining stimulus money.

Housing starts, which are a key indicator of how the housing market will fare, have been positive as of late. And many are considering home improvement mogul Lowe's fourth quarter earnings as another sign that the housing market is making a move in the right direction. The retailer announced double digit profit gains during the last few months of 2009. Home Depot is expected to release their figures any day now.

This week, and in weeks to come, we could begin to see mortgage rates become more volatile as the market takes in all the news coming out of the Fed. We'll also get new and existing home sales data this week. With housing and employment as the weakest link, any positive news could have an impact on rates.

As of Feb. 22 - early afternoon -- the 30 yr. fixed conforming loan rate was 5.125% with an APR of 5.169%; 15 year fixed conforming rates were 4.500%, APR 4.570%; 5 yr. ARM (Adjustable Rate Mortgage) Conforming, 3.875%; APR, 3.334% and the five year I/O ARM Conforming 4.125%, APR 4.101. Keep in mind that these rates are a moving target but this gives you a ballpark of where they currently reside. Check with your lender for more detailed rate information.