According to a Wall Street Journal Article from 10-27-2010 Mortgage rates may be as low as they will go, with the average 30-year fixed-rate home loan on course to rise after hovering for months at historically low levels.

The Mortgage Bankers Association predicts rates on the 30-year fixed-rate mortgage will average 4.4% in the fourth quarter of 2010, increasing to a 4.7% average in the first quarter of 2011, and climbing to 5.1% by the end of next year. That is barring any “blockbuster” announcement from the Federal Reserve next month, said Jay Brinkmann, chief economist of the MBA, at the group’s annual convention here

The Fed has said it could take more policy actions to stimulate growth, and Mr. Brinkmann said that is likely to come in the form of an additional purchase of Treasury securities. But the market has already anticipated that, and the move has already been priced into current rates, he added.

Mr. Brinkmann said he expects a pickup in purchase originations next year, but 2011 volume for mortgages to buy a home will still only be roughly at its 2009 level. Refinance business, however, is expected to drop next year, as mortgage rates begin their rise from record lows.

Still, potential home-loan customers needn’t jump too fast. While the industry group predicts a steady rise from 4.25% on a 30-year fixed-rate loan, the second lowest level it has ever recorded, even a rate of 5.1% on a 30-year fixed-rate loan is historically low.

At the conference, many mortgage bankers commented that business right now is doing well, due mainly to high refinance volume in the low-mortgage-rate environment. A large concern for them, however, has been what happens when all the refinance business dries up.

“If [interest rates] do bump up a bit, it’s a big concern on the refinance side,” said E. Todd Chamberlain, executive vice president for Regions Financial Corp., speaking on a panel at the convention. Those who have recently refinanced may be in the same homes—with the same loans—for a long time, unwilling to give up their very low rates by moving or refinancing, he said.

Total mortgage volume is expected to be nearly $1 trillion in 2011, down from an anticipated $1.4 trillion this year and nearly $2 trillion in 2009.

The industry is expected to originate an annual $480 billion in purchase mortgages by the end of this year and $626 billion next year; it is expected to originate $921 billion in refinance mortgages by the end of this year, which is expected to shrink to $370 billion next year.

The MBA forecast predicts home sales will rise slightly next year, after dropping in 2010 from 2009 levels. Sales of existing homes will finish 2010 about 8% lower than last year, but sales should rise 2% next year and 16% in 2012. And sales of new homes will finish this year 13% lower than 2009, but sales should rise from that low base by 20% next year and 40% in 2012.

“We also see some upward indication on prices” in many markets, Mr. Brinkmann said. Nationally, prices are expected to decline 1% next year, but that decline is heavily weighed down by severely troubled housing markets, including those in Florida and parts of California, he said.

Mr. Brinkmann said that there has been a large decline in household formation throughout the country, with many adults who would rather live on their own sharing a roof with parents or roommates due to financial reasons. Others might be marking time in crowded apartments, though their families are increasing in size and they would rather move to a larger space, he said.

Those people might relocate as soon as the economy improves and more jobs are created: “There is tremendous pent-up demand that is going to respond quickly to job growth,” he said.

Offsetting that, however, are mobility trends. Homeowner mobility is down, partly because of diminished equity in homes and now also because of low interest rates—it is now going to be more difficult for people to move when it means they will be giving up a 4.5% interest rate on their mortgage, he said.

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http://online.wsj.com/article/SB10001424052748704206804575467513060873320.html?KEYWORDS=mortgage+rates

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There are a multitude of reasons why you might want to take advantage of mortgage refinance. Here are a few of the main reasons:

To secure a low, fixed rate. Since Interest rates have probably dropped since you took out your current mortgage, you can refinance to take advantage of current historic low rates in mid 4%’s range. A percent decrease in your rate can equal thousand if not hunderds of thousands of dollars in saved intrest expense.

To switch to another type of mortgage. Mortgage refinance enables you to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage or vice versa. Some homeowners take out an ARM only to discover that payment fluctuations are too stressful. You can refinance to switch to a fixed-rate mortgage easily.

To improve the terms of an ARM. Adjustable-rate mortgages come with features that you might improve upon with mortgage refinance. For example, ARMs have caps on how much payments can increase per year and over the life of the loan. If you are dissatisfied with your current caps, you can refinance for better features.

To lower monthly payments. You can use mortgage refinance to extend the repayment term of your mortgage or to lower your interest rates, and both options will substantially reduce your monthly payments.

To build equity in your home faster. Some homeowners use a mortgage refinance to take out a shorter-term mortgage to pay off the loan faster with less interest expense. If you choose this option, you will build equity in your home more quickly.

To convert home equity into cash. If your home has appreciated in value or if you are willing to take out a mortgage with a larger principal, you can take the difference in cash to cover your expenses.

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