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Mortgage Rates Remain Stable but for How Long?

The US housing market continues to see mixed news heading into March. While it appears that demand for homes is increasing, prices continue to be stagnant or even lower than a year ago, creating a strong buyer’s market but removing the incentive for homeowners who are not under mortgage pressure to list their homes. This trend is likely to continue as we head into the traditionally stronger spring buying season.

Considering that the demand for homes, and thus mortgage financing, is expected to continue to trend upward, mortgage rates are also expected to climb. Current mortgage rates have been relatively stable for the past several weeks. The national average for a 30 year fixed mortgage stands at 3.86%, up 1/10th of a point from last week. 15-year fixed mortgages are available for 3.15%, also up 1/10 from last week, while the current rate on 5/1 ARMs is at 2.78%, down 4/10ths from a week ago.

There is some disagreement among experts as to how quickly current mortgage rates will change, with the majority holding the view that current rates will remain stable for at least the next week or two. However, a growing number are voicing the opinion that current mortgage rates will begin to creep upwards within the next several days.

Potential buyers should bear in mind that these averages are based on the best mortgage rates quoted by national banks. In order to qualify for the best rates, buyers should have a credit score of 740 or better and a 20 percent down payment. However, even if they don’t qualify for the best mortgage rates, anybody considering a home purchase should lock in their rate before market pressures push rates upward.

In addition to pent up demand for housing, another factor that is beginning to affect the market is the revamped Home Affordable Refinance Program, or HARP 2.0. Under this redesigned program, more homeowners will qualify to refinance their underwater mortgages. The increased demand for refinancing under HARP, as well as the limit on fees a bank can charge qualifying homeowners, is expected to drive mortgage rates higher in the coming months.

Overall, spring looks to be a stronger season for the US housing market, and an increased demand for housing will likely spur an increase in mortgage rates heading into the second quarter of 2012.