Mortgage rates in 2010 were the lowest in six decades.  Will they stay low?  Or, will they rise making the purchase of a home more expensive in 2011?

In November of 2010, the 4.17 percent interest rate was the lowest since Freddie Mac began tracking rates in 1971 and the lowest since World War II, according to Weiss Research, a financial analysis and publishing firm (www.weissgroupinc.com/research/index.html).  Rates in December did rise, fluctuating around 4.83 percent.

According to the Realty Times, the week before last the U.S. weekly average mortgage interest rate was 4.86% for a 30 year-fixed loan. (http://realtytimes.com/rtmcrstate/Arizona)  It dropped to 4.77% last week, so rates, although fluctuating, have inched up in 2011.

Still, borrowing costs are still very affordable, compared with the rates of 6 percent to 8 percent over most of this decade.  To get an idea of how good things are right now, you can look at a table of historical rates available from Freddie Mac at (www.freddiemac.com/pmms/pmms30.htm). 

The historically low rates may continue.  The chief economist of Freddie Mac wrote in an annual trend forecast on December 6 “while some rise in fixed-rates is expected, 30?year fixed-rate loans are likely to remain below 5 percent” throughout 2011. 

However, most other experts expect rates to rise at a greater rate.  HSH Associates, an independent publisher of mortgage and consumer loan information, stated that with 2010's historically low rates, interest rates have nowhere to go but up (www.hsh.com).  In addition, the Mortgage Bankers’ Association, a trade group, predicted that 30?year fixed rates will inch up to 5.1 percent by the end of 2011 and reach 5.7 percent in 2012 (www.mbaa.org).

The recent and sustained increase in interest rates indicates that consumers can expect to incur higher borrowing expenses later in the year.  Home prices are also expected to rise this year.  As a result, if you plan to buy a home in the Phoenix metropolitan area this year, you should do it sooner rather than later.

                                                                                                         N. Mark Kramoltz © 2011

Mr. Kramoltz, JD, GRI, CIPS is the owner and Designated Broker of SimplySOLD Arizona, a full service real estate brokerage located in Scottsdale, Arizona.  Mr. Kramoltz writes articles and a blog that provide valuable information on local and national real estate issues.  They are made available with the understanding that they are informational only, and have not been prepared to provide specific legal advice that may be relied on by a reader.