To stimulate the housing market and cut down the number of foreclosures currently for sale, the Federal Reserve invested 1.25 trillion dollars in mortgage-backed securities back in November 2008. Due to this program, lenders were able to keep mortgage rates as low as 4.93 percent for a 30 year fixed rate mortgage loan, which is .04 percent lower than what they would have been without the fed’s help. However, on April 1st Federal Reserve is not continuing its investment, which means that mortgage rates are about to increase.

How Much and How Fast Will Mortgage Rates Increase
Experts predict that mortgage rates will increase but slowly. Over the course of several months, you will see it rise to as much as 6 percent. Specifically, Jay Brinkmann, who is the chief economist for the Mortgage Bankers Association predicts that by December the mortgage rate will be about 5.8 percent. Freddie Mac’s deputy chief economist projects that the mortgage rate will increase to 5.75 percent.

How Much You Will Lose
With the tax credit ending on April 30 and the mortgage rates expected to increase, you may be wondering how much you will lose if you wait to buy. The good news is that the increase to the mortgage rate won’t break your budget too much. It will be less than a hundred dollars added onto your monthly mortgage payment for a house in the 150,000 to 200,000 dollar range.

You may not even lose any money at all because experts are also projecting that home prices will decrease during the same time the mortgage rates will increase. Experts believe home prices will drop 5 to 10 percent, which may save you more money than what you are losing out on having a higher mortgage rate.

Tip to Saving Money with the Current Mortgage Rate
If you are actively seeking to buy a home now, you may want to lock in the current mortgage rate. That way, when you do find the perfect home, you’ll have what the mortgage rate is now, not what it is when you put a contract on the house. It’s a great way to save money with the lower mortgage rate and if home prices do drop, you’ll save even more!