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The end of rock-bottom mortgage rates?

Posted by Scott Van Voorhis January 11, 2013 07:02 AM

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The spring market could prove to be a final fling for home buyers. Simply put, the era of more reasonable prices and cheap mortgage money may finally be winding down.

As sales rise and the backlog of unsold homes shrinks, home prices are already edging up, with certainly more increases on the way over 2013.

But even more ominously, interest rate gravy train is also about to end, with the Fed signaling it will end its massive, $40-billion-a-month bond-buying campaign it has been using to keep mortgage rates at ridiculously low levels.

Now of course the Fed isn't going to pull the plug next month - withdrawal won't start until the end of 2013.

But the markets have already started to adjust, with mortgage rates rising to 3.67 percent from 3.52 percent a month ago, Bankrate reports.

In fact, some economists are predicting rates will hit 4 percent again by year end, Bloomberg reports.

Why care? Because the Fed's easy money policy has acted as a massive housing market subsidy, enabling home buyers to pay significantly more than they would have been able to otherwise.

Even seemingly small fluctuations can make a difference in what your monthly payment will look like.

Here's a pretty good explainer from Bloomberg, which nicely lays out the stakes in all this for the average buyer.

A borrower able to make monthly payments of about $1,310 can afford a $275,000 30-year loan with rates at 4 percent, versus $300,000 with borrowing costs at 3.3 percent.

The big question now is whether we will start to see rising rates and prices start to tilt the market against buyers, and, if so, how quickly this shift will take place.

Are you ready to jump into the spring market? Are you worried about rates? What's your take?


This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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