Mortgage rates expected to climb after temporary fall

Jump in now. That’s the advice from financial experts for people who are thinking about refinancing a home or buying one, in light of the recent drop in mortgage rates.

Those falling rates are seen as temporary. Forecasters predict rates will again start to climb slowly through next year.

“Strike while the iron is hot,” said Greg McBride, a financial analyst with Bankrate.com, an online financial service.

“There is no telling exactly when they might quickly reverse course and move higher,” he said.

The mortgage company Freddie Mac reported last week that rates on 30-year and 15-year fixed-rate mortgages fell for the third week in a row and were at their lowest levels since the spring.

Rates on one-year, adjustable-rate mortgages were at their lowest point since the beginning of June.

The declines took experts by surprise.

The lower rates, generally speaking, reflected investors’ growing confidence in the Federal Reserve Board’s ability to keep inflation under control.

They also signal investors’ sense that the economy will grow solidly, though not so fast that Fed policy-makers would be forced to move aggressively in raising short-term interest rates.

Those market forces pushed down bond rates, which, in turn, depressed mortgage rates.

Benchmark 30-year mortgages dropped last week to 6.01 percent, while 15-year mortgages were at 5.42 percent and one-year ARMs at 4.05 percent, according to weekly figures compiled by Freddie Mac.

“It’s unlikely you’re going to see a decline of interest rates from where they are at today unless the economy starts to really dramatically slow, and I don’t know of anyone, including ourselves, who is forecasting that,” said Doug Duncan, chief economist at the Mortgage Bankers Association.

“So this is an opportunity. I would say that we’re going to see modestly rising rates in the next couple of years. This is a temporary dip. And, if you are ready to go, then go,” Mr. Duncan said.

By year’s end, rates on 30-year mortgages could reach 7 percent, 15-year rates 6.25 percent and one-year ARMs more than 5 percent, according to various estimates.

Lenders said the recent drop in rates has led to a burst of activity.

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