Is It Possible The Fed Will Raise Mortgage Rates This Year?
By Eric Goodwill“Tips to know if the Fed will raise interest rates!”
Many people are wondering, is it possible the Fed will raise mortgage rates this year? There is no simple answer, but the option is always on the table. The Federal Reserve is the nation’s central banking system, and is not required to get approval before making changes in interest, mortgage, or other rates. There are some factors the Fed looks to in determining what the various rates should be.
Factors
The Federal Reserve generally acts every financial quarter, and they look at several factors in making their determination. Amongst these factors are economic outlook, political pressure, and key indicators. Key indicators change rapidly and are much less reliable when trying to predict an answer to the question, “Is it possible the Fed will raise mortgage rates this year?”. To answer that question with the most trustworthy guess, we must look at political pressure and economic outlook.
Economic Outlook
The current economic outlook is not favorable to higher mortgage rates in the coming year. With high unemployment rates and banks unwilling to provide loans, the only way the housing market can improve is with mortgage rates either staying where they are or going lower.
Political Pressure
There is no political pressure to raise mortgage rates. Most political pressure at the current moment is focused on trying to find cheaper rates and payments for unemployed, or underemployed, citizens. Part of this effort includes trying to find ways to help banks turn profits (so no further bank bailouts are required), which includes ensuring that people can afford to pay their mortgages.
The Answer
So, is it possible the Fed will raise mortgage rates this year? Yes. The Federal Reserve holds that power, and if the key indicators improve and can manage to bring political pressure and the economic outlook up, the Federal Reserve may feel it is in the best interest to raise mortgage rates. However, it is not likely, and the rates will probably remain unchanged at least through 2010.
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