BOSTON (TheStreet) -- Last year's 3.5% mortgage rates are long gone -- and experts say consumers who hold off buying or refinancing homes in hopes that sub-4% interest levels will return could miss out on today's sub-5% rates, too.
"We think 3.5% rates are in the rearview mirror now," says Mike Fratantoni, chief economist at the Mortgage Bankers Association. "It's highly unlikely that we're going to get back to those levels again."
Benchmark U.S. mortgage rates hit a record-low of around 3.5% in late 2012 and early 2013 as the Federal Reserve's Quantitative Easing III program helped push long-term interest rates into the cellar. Under QE3, the central bank had been buying $85 billion of Treasury bonds and mortgage-backed securities each month in a bid to drive rates on mortgages and other long-term debt down.
But mortgage rates shot up to around 4.4% last summer after the Fed hinted in May at plans to begin winding QE3 down.
Now, market watchers expect QE3's phaseout and the strengthening U.S. economy's increased inflation risks to push mortgage rates to 5% or higher by year's end.
Fratantoni predicts rates will hit 5% by summer and 5.3% by Dec. 31.
"The U.S. economy is growing again, the Fed is beginning to back off of its very-aggressive policy to lower rates and we have [increasing federal budget-deficit] pressures," he says. "Given all of that, rates are much more likely to go up than down from here."