Can you still get a 5% mortgage?

By Les Christie, staff writer


NEW YORK (CNNMoney.com) -- There's still time to get a 5% mortgage -- but the window is closing.

On April 1, the government will stop buying mortgage-related debt, which will send interest rates slowly higher.

Since November 2008 the Federal Reserve has snapped up $1.25 trillion worth of mortgage-backed securities -- essentially, people's mortgages bundled together and sold to investors.

The program has kept interest rates artificially low over the past year, with the price of a 30-year fixed-rate loan ranging between 4.93% and 5.09%, according to mortgage giant Freddie Mac.

That's about 0.4 percentage points lower than these loans would have been without the government's intervention, according to Jay Brinkmann, chief economist for the Mortgage Bankers Association.

But when the Fed stops buying and cedes the playing field to private investors, they will almost surely demand better return for their risk.

"Rates are going to be higher than they are now," said Brinkmann.

How much higher is the question.

"It's really hard to tell right now," said Amy Crews Cutts, Freddie Mac's deputy chief economist. "The Fed said it will taper off [purchases] gradually. Each week they buy less than the week before."

So far, though, the tapering has failed to spawn higher rates. Last week, the 30-year was just 4.96%.

Still, all of the experts agree that mortgage rates will climb. The good news is that none of them think the increase will be very large.

Their projections are for a gradual run up to between 5.5% and 6% by December. Brinkman's projection is a rise to 5.8%; Cutts is to 5.75%.

That will add only about $70 to the monthly payment on a $150,000 note. That's still very reasonable and should not discourage many consumers.

Homebuyers may even find themselves paying less every month as housing markets continue to experience price declines.

Industry experts are projecting further home price drops of 5% to 10%. That would wipe out every bit, and more, of the monthly payment increases higher mortgage rates would bring. To top of page


Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.07%4.28%
15 yr fixed3.18%3.26%
5/1 ARM3.36%3.43%
30 yr refi4.05%4.21%
15 yr refi3.17%3.18%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,098.45 18.88 0.11%
Nasdaq 4,580.27 22.58 0.50%
S&P 500 2,003.37 6.63 0.33%
Treasuries 2.34 0.01 0.39%
Data as of 2:32am ET
Company Price Change % Change
Bank of America Corp... 16.09 0.08 0.50%
Apple Inc 102.50 0.25 0.24%
Intel Corp 34.92 0.27 0.78%
Facebook Inc 74.82 0.96 1.31%
General Electric Co 25.98 -0.03 -0.12%
Data as of Aug 29

Sections

The deal would value Vice at $2.5 billion. The online media company would also create content for the cable network, delivering a wider audience. More

Gas prices are falling to nearly $3 a gallon in some parts of South Carolina, and that will soon be common in much of the country. More

Netflix told the FCC that its speed on the Comcast network became so slow that customers began dropping their service. More

The Coolest Cooler is the most successful Kickstarter campaign in the site's history, raising $13.3 million from over 62,000 backers. More

Five CNNMoney readers share stories about saving that you can learn from: What they would do differently if they had another chance. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.