5-year yields (which influence 5-year fixed rates) will rise just 34 basis points by year end, to 1.93%. This implies a still-low 3.53% five-year fixed rate on Dec. 31, 2012—assuming spreads stay the same as today.
Even if rates rise more than that this year, one could argue that doing so might have a negative effect on mortgage affordability, and thus home prices.
Whatever the case, there’s little benefit in rushing a home purchase in order to lock in a “good rate.” Most people are better off taking their chances with rates (or getting one or more six-month rate holds) and then:
a) Finding a better-value home, and/or
b) Building a bigger downpayment, and/or
c) Building a liquid 6-month emergency fund (if they don’t have one), and/or
d) Improving their income reliability or cash flow.
A great rate and short-term price appreciation mean nothing if buying a home puts you at risk of negative equity, illiquidity, a loss of net worth or insolvency.