Mortgage Rates Predictions

Mortgage rates predictions are notoriously tricky, and at this particular point in time, trickier than usual. The financial world is still reeling from the subprime crisis, and the political pressure on interest rates is running at an all-time high. Mortgage rates predictions need to take into account the political climate, as well at the economic variables.

Making mortgage rates predictions is a bit like making weather predictions - you can't usually give a precise prediction too far in advance, but you can be generally sure enough about the range within which the result will fall.

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Interest rates are always going to fall within a certain range. Well, OK, I suppose it is possible that they may stray outside that range, but if they do, mortgage rates predictions will be the last thing on your mind. It will be more a case of where's the shotgun, and how much food do we have stacked in the storm cellar?

Mortgage interest rates are made up of two components - the "real" interest rate, and a factor for inflation.

If you think about it, even if you don't want to charge interest, if you give someone your money for a year, and inflation is running at , say, 5%, then when they give you back that money, it is actually only 95% of what you gave them in the first place. To break even, you need to charge them "interest" equal to the rate of inflation.

The "real" interest rate will usually run between 1% and 10% - which is quite a range. Inflation at the moment, what with oil prices, is a bit of a nightmare, and in fact there is a case to be made that the current mortgage interest rates of around 6% are just barely covering inflation. In other words, we may already have a real interest rate of lower than 1%.

As inflation rises, mortgage rates will rise. Mortgage rates predictions will track in parallel with predicted rates of inflation.

And what is inflation doing right now?

Oil prices up - that means heating costs, gas, electricity, and transport costs are going up.

Food prices up - because of global competition for food crops to make ethanol as an alternative to petroleum-based fuels.

Prices of imports up - as the greeback slides against the other currencies, imports such as cars, computers, consumer electronics, clothing and footwear all become more expensive.

Inflation is on the rise, which means upward pressure on mortgage interest rates predictions.

The slidingUS dollar is a major worry for bankers and politicians.

The subprime crisis has caused a crisis in confidence in the entire US financial system, especially amongst the legendarily flighty mobile international capital base. These are the currency trading funds, short term money market funds, and other large holders of cash with access to currency trading platforms.

This cash is looking for two things - a safe haven (where the value won't decline), and a good return. The two are linked, because the stronger the currency, the more of the interest payable actually translates into profit once currency movements are taken into account.

The plummeting US dollar is anything but a save haven, and mobile capital is feeing in droves. This makes the currency drop even further - basically Uncle Sam is experiencing a "run on the bank of USA".

The only way to stop this money from fleeing our shores is to pay enough interest to ffset any currency fall - or predicted currency fall.

Mortgage rates predictions are based on general interest rates predictions, and the plummeting US dollar is a siren call for higher interest rates.

There is one reason why mortgage rates predictions are not currently running at 12% plus, and that is the political pressure of an election year.

The government wants another term, and if they preside over a doubling of mortgage interest rates during an election year, they won't get one. It's as simple as that.

US voters aren't as sensitive to exchange rate predictions as they are to mortgage rates predictions, so the government is basically sacrificing the greenback to keep the housing market from imploding completely.

The chickens will have to come home to roost with higher mortgage rates after the election, and the long term pain of a weakened US dollar wil push inflation higher, and hence interest rates higher.

The bottom line is this - grab yourself a 30 year fixed rate mortgage now. Rates are unlikely to be this low again for another couple of decades.

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Any mortgage rates predictions made in the current climate must be hedged about with caution. When life moved a slower pace, and when mortgages were less widespread, movements in mortgage rates predictions were much less significant than they are today.

Mortgage rates predictions were a simple calculation of the supply of capital, which was only available from banks, and the demand from prospective borrowers. Unlike in these modern, instant gratification times, approval for a mortgage was by no means guaranteed, even with excellent earnings history and references. Should you have the temerity to request mortgage finance, you had better have saved up your 20% down payment, or you wouldn't even be allowed through the door to meet with the bank manager. Taken all together, the "market friction", in making mortgages harder to get, made the market smaller, and made mortgage rates predictions easier and more accurate.

In current times, our circumstances are somewhat different, and so are mortgage rates predictions. Banks are granting mortgages to people who have no savings at all, sometimes even no secure income.After a decades-long abandonment of sound risk-management principles, we have a difficult environment for mortgage rates predictions.

Worse than that, when you feed ever-increasingly risky practices into a financial system, you make it increasingly likely that one new shock will bring the whole system down. You cannot assume that the economy will always be strong and growing - indeed, you must make the opposite assumption, because bad times are guaranteed to come along. Once the puff goes out of the bubble, we will have to deal with reaping the mortgage rates predictions we have sown.

Under the current circumstances, homeowners should be closely watching the mortgage rates predictions. You see, for many home owners today, the mortgage rates predictions are actually lower interest rates than their existing 30-year loans. Check your mortgage statements to find your current interest rate - if mortgage rates predictions are for something lower, now is the time to contact a home finance professional.

Don't be put off by the doom and gloom in the media. Today's mortgage rates are some of the lowest in history, so refinancing now could put you in a very strong position going forward. If you have a higher mortgage payment than you need to have, you are just throwing money away. Act now, while mortgage rates predictions are still at historically low levels. The silver lining in the dark cloud of the global financial crisis is that the politicians have succeeded in bringing interest rates down to well below where the open market would place them.

Mortgage rates predictions aren't necessarily bankable. When politicians get involved in anything, reliability goes out the window, and mortgage rates predictions are no exception. One thing we can say with confidence is that mortgage rates are unnaturally low right now. According to mortgage rates predictions, this is the best possible time to refinance your mortgage at a lower rate of interest. As long as you can qualify for the finance, you should make the most of this once-in-a-lifetime opportunity.