Homeowners have been refinancing and taking advantage of low interest rates and Government stimulus programs. However, I think in 2010, things may change in the housing market. Here are my mortgage interest rate predictions for 2010, how I made them, and how they will effect homeowners looking to refinance.

Many homeowners have benefited from the low mortgage interest rates that have been available throughout most of 2009. The rates have been low due to Government stimulus programs, a bad economy, and a struggling housing market. In order to keep things as stable as possible, interest rates needed to be reduced to help homeowners. Homes throughout 2009 have pretty much all dropped in value, some by a lot. This is leaving mortgage lenders and banks with foreclosed homes in their inventory that will actually end up costing them money. Instead of letting more homes be lost, lenders and banks were more likely to offer refinancing or mortgage modification options to homeowners. In addition to the natural demand to stop foreclosures, the Government and President Obama have announced over $75 billion in funding for homeowner stimulus programs. These stimulus programs kept interest rates low, and provided new options for nearly every homeowner to get a mortgage refinancing.

However, I do not things will be so good for homeowners as far as interest rates are concerned in 2010. I predict that sometime around April of 2010 that mortgage interest rates will rise by about 1.25%. While this seems small, it actually adds up to a lot of money over the course of a 30 year mortgage. This increase will make some homeowners not be able to benefit at all from refinancing a mortgage. I think that a typical rate for a 30 year fixed mortgage will be around 6.25%-6.50%. Right now, the same home loan can be had for around 5%.

I think rates will rise due to a better housing market, and a improvement in the overall economy. While things wont be perfect, I do think that the bottoming out of the market has already happened. This means that there will be increased activity in the housing market which will bring up home prices, and help the overall economy. When this happens, interest rates will rise as the need to provide the absolute lowest interest rates to help homeowners will be much less needed. Also by then many homeowners will have found mortgage refinancing help and options with Obamas stimulus programs.

While the future will be more financially stable and secure for homeowners, it will come at the price of increased interest rates, and less mortgage refinancing options. However, refinancing a mortgage will still be very beneficial for many people, even after the rate increase I predict. Homeowners who are struggling or considering a refinance should take action now while the mortgage rates are that low.

-M Petrone

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