Although fixed rates for mortgage loans will remain low for the rest of the this year, the Mortgage Bankers Association forecasts rates will rise 30 percent by 2012.
All that spells higher prices for future home buyers and less business for the mortgage industry.
Home buyers in 2011 can expect to pay an average 5.1 percent for a 30-year fixed-rate mortgage, the Mortgage Bankers Association (MBA) said Tuesday. In 2012, the average rate will climb to 5.7 percent.
For the mortgage industry, the climb in rates means that business will decrease. Even though home sales and loans should pick up in 2011, far fewer existing homeowners will refinance their home loans. The MBA forecasts that mortgage originations will fall from about $1.4 trillion in 2010 to just under $1 trillion in 2011.
"The sluggish economy, weak private demand for debt financing, and low inflation are keeping downward pressure on rates," said Jay Brinkmann, chief economist for the Atlanta-based industry group, in a release. "Offsetting that, however, is the large increase in government financing needs and the impact the weakening dollar has on foreign investors in US debt. In addition, there is much speculation surrounding what the Federal Reserve will do in terms of additional monetary policy actions."