Today's Mortgage Rates May Go Back Up

One thing is for sure. The current mortgage rates can't stay unchanged. Yesterday's the Mortgage Bankers Association lowered its forecast of mortgage originations in 2009 to $2.03 trillion, a drop of over $700 billion from its March forecast. $84 billion of the drop is due to lower purchase originations and the rest is due to lower rate/term refinancings and very low volumes in the Fannie Mae and Freddie Mac Home Affordable Refinance Program (HARP). MBA is now forecasting $737 billion in purchase originations and $1,297 billion in refinance originations.

The chief economist of the Mortgage Bankers Association Jay Brinkmann particularly said in his statement.

"In March we boosted our forecast of mortgage originations by over $800 billion following the drop in interest rates associated with the Federal Reserve’s announcement on the Treasury bond and mortgage-backed securities (MBS) purchases programs as well as the implementation of HARP. We warned at the time that with the billions in Treasury securities that would be issued to finance record budget deficits and with the Fed expected to purchase only a portion of those Treasury securities, how long rates stayed low would depend on whether other investors stayed in the market. If other investors shied away from Treasuries due to expectations of future inflation and the declining value of the dollar, the effect on rates would be more short-lived and our mortgage originations forecast would prove too optimistic. That has proven to be the case."

My question is what will happen to the current mortgage rates after we hit the deadline of the $8000 dollar mortgage tax credit. I read a comment in today's Baltimore Sun which basically reads that "as soon as we hit the deadline for 8K credit for the first time homebuyers (November?) and the mortgage rates will hit 6%, the sales will go down dramatically, therefore causing further price drops. The sad part is that the buyers will still have to pay the same money for a cheaper house, because of the rate increase."

On a positive side the mortgage refinancing is up about 125 percent with loan to value ration as we consider the rise of the current mortgage rates. Current mortgage rates have been increasing lately making refinancing not feasible for many homeowners, including homeowners eligible under the Making Homes Affordable Program. The average 30-year mortgage interest rate is at 5.65 percent this week, a sharp increase since mid May, 2009 when the average rate was at 4.84 percent.