Mortgage rates in the U.S. fell slightly after inching up for the past two months. However, experts believe that the fall is only brief and rates will surge depending upon the Federal Reserve's decision to cut down its bond purchasing scheme, according to several media reports.
While the 30-year mortgage rates went down to 3.93 percent from last month's 3.98 percent, 15-year mortgage rates came down to 3.04 percent from the 3.10 percent recorded in May. However, the average mortgage rates seemed to have gone up 0.01 percent for the 30-year rates while the figures remained unchanged for the 15-year rates.
Rates have been at record lows for more than a year now, only edging up in the recent seven weeks. Figures have remained low due to the Fed's bond and mortgage securities buying scheme. The fed has been purchasing bonds worth $85 billion since late 2012. The process sent long-term mortgage rates down to record lows and helped people avail loans easily.
However, now that the economy is on a steady rebound, the Fed has been considering scaling back its purchasing scheme. According to Businessweek, Ben Bernanke, chairman of the Federal Reserve suggests that the market may have become strong enough to withstand higher borrowing costs.
But a higher increase in rates could affect the market adversely as its buoyancy is supported largely by the low interest rates. Experts expressed mixed views on the issue at hand. While some believe that the market is not ready for a dramatic change yet, others believe that an increase in interest rates would definitely hold back or slow the sector's growth remarkably, reports The Wall Street Journal. Higher rates could also affect home refinancing.
"As interest rates begin to rise from their historic lows, some demand may also ebb from the market as home purchases become more expensive to finance. While we believe the housing recovery will remain strong, home value appreciation will slow down, and buyers in it for the short term could get burned if they assume home values will continue rising as they have unabated," Stan Humphries, chief economist at Zillow, said in a statement to Bloomberg.
