Buying a home is about to become more expensive.
Rates on 30-year fixed mortgages are expected to rise to 5.4% by the end of 2015, predicts the National Association of Realtors. That’s up from about 3.8% now, according to Freddie Mac.
Blame the Fed, which is expected to start raising interest rates next year from its current level of nearly zero.
"The Federal Reserve will certainly be raising their Fed funds rate at some time during the middle of next year," said Lawrence Yun, chief economist at the National Association of Realtors, in an interview with TheStreet. "But the long-term rates like mortgage rates will be rising in anticipation of that so the long-term bond investor will be taking cues about when the Fed will raise short-term rates."
The 10-year Treasury yields nearly 2.2% currently, compared to almost 3% at this time last year. Mortgage rates tend to move in tandem with the 10-year bonds.
It’s not surprising that Yun forecasts the 10-year Treasury notes to reach 3.7% by the fourth quarter of next year.
This article was republished with permission from TheStreet.