A Calculated Risk On Mortgage Rates; Why One Expert Thinks They'll Go Lower
Smith, chief economist at the National Association of Realtors, closed on a house purchase in Alexandria Thursday. His mortgage? A one-year adjustable at 5.25 percent. Why a one-year? Because, unlike many other housing economists, Smith thinks fixed-rate mortgage rates will go down this year and into the next.</br></br>The Federal Reserve is expected to announce next week that it will raise a key interest rate -- the benchmark federal funds rate -- to 5 percent from 4.75 percent.</br></br>And when the Fed plays around with interest rates, the conversation around Washington dinner party tables inevitably turns to mortgages.</br></br>But nobody needs to worry, Smith said. Contrary to what many Wall Street analysts are predicting, Smith believes that mortgage interest rates, still quite low by historical standards despite their upward drift in recent months, will go down later this year.</br></br>"Rates for a 30-year fixed mortgage should be down around 6 percent by the end of this year, plus or minus a bit," he said. The Mortgage Bankers Association sees a downward trend as well, although not as significant a dip as Smith predicts.