The U.S. economy is picking up steam and a healthier economy is leading to more home sales and higher interest rates.  Just look at the latest jobs data to see how the economy is improving.  With more spending power in the hands of more families, and the inventory for housing showing little change, home prices to be heading higher. 

More sales and real estate transactions will put increased pressure on loan demand to match the housing demand.  Just like the supply and demand strain results in upward pressure on housing prices, greater demand on home loans generally leads to increased costs displayed in the form of higher interest rates.

Additional factors will have an even greater impact on home loan rates.  An increase in employment not only means the economy is strengthening but the Federal Reserve is more likely to continue tightening monetary policy.  Tighter monetary policy by the Fed is going to result in a rate hike, maybe even more than one rate hike.  The prospect of a tight Fed policy is already putting pressure on mortgage rates.  And mortgage rates will likely continue their upward march through the year as the U.S economy strengthens and the Fed normalizes interest rate policies to match and expanding economy.

The top five bank mortgage lenders in the U.S. have already ratcheted up their rates quite bit in the last 30 days as mortgage bond prices have dropped in anticipation of rising interest rates this year.  The average 30 year fixed rate home loan at the nation’s top five mortgage lenders increased to 4.150% with an average APR of 4.223%.  These are the highest rates seen on the 30 year conforming loan all year. 

New home buyers and existing home owners who have been on the sidelines while considering buying or refinancing should start taking action soon to capitalize on the rates that are available as well as avoiding the potential of rising home prices as housing demand expands.  Prospective home buyers should always shop sensibly for their new home but the potential for a hotter market brings greater importance to this notion.  And sensible home shopping has to carry over to mortgage shopping in order to secure a competitive loan rate with low costs even though interest rates can be extremely hard to predict.

The top five mortgage lenders polled to establish the average 30 year mortgage rate included Chase, Bank of America, US Bank, Citibank, and Wells Fargo.  The mortgage rates were obtained by these home loan lenders on the close of business June 5th, 2015 and are based on an average loan amount of $250,000.00 for single family home purchase with a minimum 20% down payment.

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