Stay Calm. Higher Mortgage Rates Aren't That Big a Deal
NEW YORK ( TheStreet) -- The Federal Reserve is out with its latest projections for the U.S. economy, and those estimates lean toward the bullish.
At an Open Markets Committee meeting Wednesday and Thursday, Fed officials released the following benchmark projections:
U.S. Gross Domestic Product in 2013: 2.3%
Unemployment rate in 2013: 7.3%
2015: 2% With those estimates, the Federal Reserve is projecting a strengthening economy but stopping short of easing its monetary stimulus strategy, and it will continue to buy up agency mortgage-backed securities at a rate of $40 billion per month and longer-term U.S. Treasuries at $45 billion per month. minutes released from the Open Markets Committee meeting. Ostensibly, that should keep interest rates low and mortgage rates from rising too high. But as homebuyers who have done their homework know, rates have risen this year, especially in the all-important summer buying months. According to the BankingMyWay Weekly Mortgage Rate tracker, rates have risen from about 3.9% on June 1 to 4.6% this week. That's a fairly significant rise in a short time, and one that could scare off homebuyers who see higher mortgage payments when they see higher interest rates. But should those rates really scare off potential homeowners? Not really, says Rick Allen, chief operating officer of Mortgage Marvel, an online mortgage services provider. "Since Federal Reserve Chairman Ben Bernanke announced that the Federal Reserve might slow the pace of its bond-buying stimulus this year, mortgage rates have jumped dramatically," Allen says. "Potential homebuyers might be discouraged, but they shouldn't be." Allen lays out the following scenario for homebuyers, maintaining that the difference in mortgage payments from a 3.9% mortgage rate to a 4.6% mortgage rate isn't all that dramatic.
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