In early December 2008 the Treasury Department “leaked” a plan that it was considering  lowering mortgage interest rates. On December 16th the Federal Reserve (FED) dropped its target for the Federal Funds Rate from 1% to between 0 and 0.25%. In addition the FED pledged to use “all available tools” to fight the current downturn in the economy. Based in it’s statements the FED plans to keep interest rates at “exceptionally low levels: for some time to come.

The effect of these actions was to move mortgage interest rates lower. They bottomed in mid January before rising a little bit through the end of February. Interest rates then started moving down again and by mid March they reached a low point which held relatively stable through May 27th. Despite predictions that interest rates wou ld move lower, on May 27th the market panicked and rates shot up peaking on June 10th. Since that time the trend in interest rates has been moving down.

So where are we headed? The other day Mark Zandi, chief economist with Moody’s Economy.com, changed his forecast slightly. He had been leaning towards an interest rate of 4.5 percent by the end of the summer. Now, “4.5% seems increasingly less likely,” Zandi acknowledged. “I’m hoping rates move back to below 5 percent in the next few weeks.”

As we have seen in the past predicting the movement in mortgage interest rates can be a tricky business. For those who are considering buying a new home or refinancing their current mortgage it appears this summer will a good time to accomplish either.

Thank you to mortgage professional, Alan Gross of National City Mortgage, for supplying this timely information.