There was an article in the LA Times recently talking more about the likelihood of mortgage interest rates increasing dramatically in 2010. Here are some bits from that piece:
Mortgage rates are continuing their creep upward in a trend that well may choke off a recent refinancing boom and provide a test of the strength of the housing market in 2010. …
The climb comes even though a government effort to keep rates low is in place for a while longer. A Federal Reserve program to spend $1.25 trillion to support the market for mortgage-backed securities is scheduled to end in the spring.
Every tick up in loan rates makes it less likely that someone with an existing mortgage will refinance to save money.
But rates in the 5% range remain extraordinarily low by historical standards, offering a huge incentive for buyers.
For example, principal and interest payments on a new 30-year fixed-rate mortgage were about one-third less than they were in May 2000, when rates peaked at 8.6%, said Frank Nothaft, Freddie Mac’s vice president and chief economist.