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Loan officers know that the Federal Reserve has announced it will raise interest rates in 2014 at the earliest. That doesn’t mean another two years of 4% mortgage rates, however -- external factors like inflation and the global economy also have an influence.
The Federal Funds Rate sets the lowest lending rate available to banks but mortgage rates are something different, and can both rise and fall independent of the Fed Funds Rate. Other factors to consider are an outperforming economy, which would increase demand for lending capital, and increased demand for mortgages (a somewhat ironic consequence of HARP 2.0, perhaps).
All this, of course, makes the exact timing of any mortgage rate increase difficult to forecast.
Rising rates are certainly a possibility, then, for a variety of reasons. And loan officers are always having to remind borrowers that rates naturally fluctuate; in fact, it’s the one thing that’s remained constant over the past fifty years, with annual changes of 1.00-1.500% as the norm.
With little room to fall, analysts believe mortgage rateas have nowhere to go but up.
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