Have We Seen The Last Of Sub 5% Mortgages?

As the government continues to print money inflation fears are flaring up and we have seen interest rates climb over 75 basis point in the past two weeks.

Rates for conforming 30-year fixed loans — the plain vanilla mortgages that make up most of the market — jumped from an average of under 5% two weeks ago to over 5.7% this week.

The bond market, which ultimately determines what happens to interest rates, tends to drive rates down when the economic outlook is bad. Signs that the economy may no longer be getting worse contributed to the shift away from the rates under 5% seen in recent months.

However, some financial analyst are cautioning against the idea that we are going to see a major jump in rates. The economy will have to improve to support higher price points and realistically that will probably not happen until 2010.

Bankrate.com senior analyst Greg McBride said federal government borrowing to fund its huge deficit spending is driving up borrowing costs for everyone, “and for consumers that means higher mortgage rates.”

“If you wanted a sub-5% rate, that opportunity has passed you by,” McBride aid.