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What Will Mortgage Rates Look Like in 2013?


2013 mortgage rate outlook

According to new statistics released by the Federal Reserve, the U.S. economy is still struggling, but that could actually be good news if you're in the market to buy a house -- especially in 2013.

Here's how the numbers add up:

As of August 2012, the national unemployment rate was still above 8%.  By the end of the year, the Federal Open Market Committee says our economy will only see a 2% growth.  As a result, banks are nervous about loosening up the credit standards that they tightened after the housing bubble burst.

Making things worse, Federal Reserve Chairman Ben Bernanke has said that if Congress doesn't address the impending budget cuts and tax increases before 2013, the economy could be doomed.

Sounds like bad news for borrowers, huh?

But wait just a minute…

The Federal Reserve has been trying to stimulate the economy for the past few years by keeping interest rates -- and, therefore, mortgage rates -- low.  In fact, mortgage rates have been setting new record lows all year.

So, if you're planning on buying a house after the calendar turns to 2013, you'll still be able to take advantage of low mortgage rates.

But there's more…

Right now, The Fed is trying to resuscitate the economy by purchasing billions in bonds.  The most recent wave of purchases started last week.  Their plan is called the Quantitative Easing policy (better known as QE3), and it's designed to have The Fed buy $40 billion in mortgage-backed securities each month.

If you're not a banker, an economist, or a number junkie who understands the significance of that, don't worry.

In their official press release, The Fed explained their plan in layman's terms by saying, “The policy should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.”

In other words, they want to make sure that interest rates stay low.  As a result, it will encourage more Americans to spend money -- like purchasing a home.  They're hoping that by jump-starting spending, it will boost the economy, companies would hire more people, and we can get back to normal.

So, how does all of this affect you?

Banks are no longer going to loan money to people who can't make their mortgage payments.  They learned their lesson in 2008, when millions of borrowers with sub-prime loans got behind on their payments and caused the entire market to collapse.  Ever since, houses have been foreclosed  because people who probably shouldn't have been approved for a loan in the first place got mortgages.  
If you can qualify, you're likely to get a great deal on a mortgage in 2013.  In fact, The Fed knows that it takes time for the economy to recover, so they've announced they are keeping interest rates at the current rate until at least mid-2015.

Obviously, a 15-year mortgage will have a lower interest rate than a 30-year mortgage because you're paying back in the loan in a shorter amount of time, but expect both to remain below 3.6% for the next year.

Also, because the economy is struggling, Bernanke says he thinks the inflation rate -- or, the increase in your cost of living -- will remain below 2% until 2015 as well.

So, if you'll be able to afford a new home, 2013 looks like a great year to go out and do it!

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