Mortgage Rate Increases Expected Fed Raises Rates Before January 2012

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    Minneapolis Federal Reserve President Narayana Kocherlakota said if his underlying inflation predictions hold true, it’s certainly possible that the central bank will have to raise the funds rate by more than a half percentage point by the end of this year.

    Since most lenders base their loan rates on the Fed Rate this means that borrowers can expect to see increases of at least .5% but most likely more as lenders tend to cover their costs and add a profit.

    This may mean that home sales remain stagnant however with rates now just below 5% for a thirty year fixed rate mortgage it is pre-qualification of the borrower that will be the biggest inhibitor to increased sales.

    Philadelphia Federal Reserve chief Charles Plosser remarked that a “stronger rebound in the economy or inflation that some now expect could require policy actions to be taken sooner and more aggressively than many observers seem to be anticipating.”

    This comes after Labor Department reports showing a .1% decrease in jobless numbers for March 2011. Temporary Seasonal hires by big box retailers were the largest contributing factor for a rebound in jobless reports.

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