Rising mortgage rates would do little to slow recovery, report finds

Although the Federal Reserve announced it will work to keep mortgage rates low until at least 2014 through new lending regulation and standards, a recent report from Capital Economics says it may not matter.

Although the Federal Reserve announced it will work to keep mortgage rates low until at least 2014 through new lending regulation and standards, a recent report from Capital Economics says it may not matter.

According to Capital Economics, with home prices at there current level, an increase in mortgage rates would do little to slow the housing market's recovery.

"To start with, even though the prospects for economic growth look better than they did a few months ago, the monetary policy tightening that would be required to raise Treasury yields significantly, and hence mortgage rates, is not in the cards," said firm economist Paul Diggle.

However, experts from the company noted that due to new lending practices, it is unlikely that there will be a rapid increase in rates anytime soon.

Meanwhile, the report noted that based on other indicators, such as improving home sales and rising builder confidence, mortgage rates should remain flat, as they continue to provide a number of affordable options for prospective buyers.



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