Interest Rates Much Higher Claims Morgan Stanley Economist; Mortgage Rates to 8%

Posted on | December 29, 2009 | No Comments

Yesterday a chief economist at Morgan Stanley predicted that interest rates were going to move much higher in 2010 as the 10 year treasury rate yield could increase as much as 40%.  With an increase of 40% in the 10 year yield we would likely see the 30 year fixed mortgage rate around 8%.  This is not good news if you have been waiting to refinancing or buy your first home.  Hoping for all time low mortgage rates may leaving you wishing on the wrong star.


The reason that Morgan Stanley feels that interest rates are going to increase so drastically is because the Federal Reserve Bank has been doing everything in their power to keep interest rates artificially low.  Over the last nine months the Fed has purchased US Treauries and mortgage backed securities.  They have recently completed their purchase program of US Treasuries but they plan to continue buying mortgage backed securities until at least the end of March 2010.

When all the Fed programs end there is a great possibility that mortgage rates will move up at least one full percentage point.  At the present time that would push 30 year mortgage rates to 6.35%.  According to many analysts this is a low estimate as mortgage rates could increase to even higher levels.  At this point it will be interesting to see how many home owners scramble to get their mortgage applications in as higher mortgage interest rates are likely in the near future.

Author: Jesse Wojdylo

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