Investment Mortgage Guy

I believe mortgage rates are likely to rise above 7% on a 30 year fixed over the next 12 months or as high as 7.75% on investment property. There are several factors to support my position.  First of all, there is an increasing concern about inflation. Inflation causes rates to rise as the cost to buy things increase.  The Fed will eventually follow suit and increase short-term rates upwards which will make long term rates trend north as well.

Secondly and most importantly, there is an increasing fear from investors that mortgage backed securities are becoming riskier.  I believe even more bad news is on the horizon as mortgage default rates will continue to rise. This will cause the investors to demand a greater rate of return and will push interest rates higher.

In conclusion, there are many factors in the economy that make me believe that rates will be on the rise for the remainder of this year. This is very important to the real estate investor for cash flow purposes. For instance, if rates go from 7% to 7.75% on a $150,000 loan, the difference in ¾’s of a point in interest rate is $75 per month. That same $75 per month could be used to buy them an additional $11,200 more in home or to be used as monies injected to fix up a property (using our rehab loan program) .

I have said for quite some time that we are in the perfect storm right now because of low home prices (buyers market), low rates, and higher rents. Don’t wait too long to capitalize on this.

For more information check out this article by CNN Money entitled “Time to Lock in Your Mortgage Rate”.

Make it a great day!