According to the Mortgage Bankers Association forecast, fixed mortgage rates aren't expected to rise dramatically in the next few years.
Fixed-rate mortgages are expected to remain around 6.3% to 6.4% for the rest of 2006, according the latest forecast. Rates are expected to hit 6.7% by the end of 2007 and 6.8% by the end of 2008.
"We expect long-term rates to remain low this year, helping to cushion the slowing in residential housing activity that has been underway for more than a year," said Doug Duncan, chief economist for MBA.
Duncan continued to say that interest rates continue to remain "quite low by historical standards."
The MBA expects to see between $1.1 trillion and $1.5 trillion in adjustable rate mortgages to reset in 2007. Approximately $650 billion of ARMs are expected to be refinanced. Between $500 and $800 billion will actually reset with new interest rates.
Economists have been concerned in recent years of the impact that high mortgage will have on consumer behavior and economic growth. With non-traditional loan programs seeing high popularity and higher interest rates than in past years, many homeowners have been stressed.
The good news is that the lower mortgage rates remain, the better off consumers are in the face of higher mortgage payments. In other words, they won't be as high as they could be.
The MBA forecast says that the home market is showing signs of stabilization. Existing home sales are expected to fall 9% in 2006 and an additional 8% in 2007, according to Duncan. New home sales should decrease 18% in 2006 and an additional 8% in 2007.
In 2008, the MBA expects to see home sales begin to increase modestly. Appreciation rates are also expected to begin to regain strength in 2008.
The MBA also predicts that the Federal Reserve will keep the Fed funds rate at 5.25% through 2008.
"Although we expect core inflation to moderate going forward, we believe that the currently elevated rate will keep the Fed from lowering interest rates despite signs of slowing economic activity," explained Duncan.
Martin Lukac represents http://www.RateEmpire.com, an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com and San Diego loan portal http://www.LendingSanDiego.com