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Mortgage interest rates predictions have varied anywhere from below the current interest rate to well above it. There are conflicting influences on mortgage interest rates, and all of these conflicting influences must be taken into account when making mortgage interest rates predictions.
Financial markets, including share prices and mortgage interest rates, are chaotic systems. This is not chaotic in the common usage of the term, meaning something with no order to it at all, but chaotic in the mathematical sense, in that the formulas which describe how mortgage interest rates are determined, which are the formulas used to make mortgage interest rates predictions, have self-referential components.
Making mortgage interest rates predictions is like making weather predictions - it is impossible to be precisely accurate with mortgage interest rates predictions, and the further in advance you try to predict mortgage interest rates, the greater the margin of error in the prediction.
On the other hand, chaotic systems are predictable in broad terms.
If you think about the weather, you may not be able to predict the top temperature for a given day in July, but you can reasonably sure it will be within a certain range - say, if you live in Miami, between 80 and 95 degrees F, and if you live in Stockholm, between 16 and 25 degrees C.
Just as climate gives a broad indicator of summer top temperatures, economic climate gives a broad indicator of mortgage interest rates. Just as specific local circumstances give us today’s weather, the specific short-term factors in play give us today’s interest rates.
Factors Which Make Mortgage Rates Predictions Rise: Inflation
So called “real interest rates”, the interest rates which move in response to supply and demand in the financial markets, are independent of inflation. They are calculated assuming that inflation is zero.
To get from the “real interest rate” to the “nominal interest rate”, which is what your bank will charge you for your mortgage, you simply add on the annualised percentage rate of inflation.
This means that if nothing changes whatsoever in the housing market, but something changes elsewhere to create inflation (like, for example, oil prices increase, raising the prices of gas at the pump, heating oil, and anything transported by road), then there will be upward pressure on interest rates, and mortgage rates predictions would have to take that upward pressure into account.
For the full story on factors influencing interest rate predictions, visit Mortgage Interest Rates Predictions.