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Mortgage rates predictions must take into account economic and monetary factors, but these alone do not provide the full picture. Mortgage interest rates, foreclosures, and falling house valuations are a political as well as an economic issue, and the political landscape must be taken into account when making mortgage rates predictions.
The US Government is an 800-pound gorilla in the financial markets. By issuing Treasury bonds at different interest rates, the government can influence the overall market for money, and thus affect the “real” interest rate.
This power is not infinite - the government of Japan, for example, reached the point where real interest rates were effectively zero, and corporations in particular had a field day borrowing what was essentially “free” money. Needless to say, this situation is not sustainable, and the Japanese economy is still groaning under the strain of recovering from that particular economic management blunder.
That is not to say that the US government will necessarily learn from the mistakes of other governments. Mortgage rates predictions need to take into account the political imperatives as well as the purely economic influences on interest rates. Voters are particularly sensitive to losing their homes in large numbers, and the government is keen to avoid the scenario in which interest rates go up, and more homes are foreclosed, only to be sold into a plummeting market, further worsening the oversupply problem in residential housing.
Everyone - the government, the banks, and the home owners - are in agreement that this is an outcome to be avoided. Mortgage rates predictions based on purely economic considerations might indicate that mortgage interest rates are due to rise, but while the political pressure is running high, and in an election year, the government will do everything in its power, however economically irresponsible in the long term, to push the interest rate rises off until after the November elections. Mortgage rates predictions must take this political distortion of the financial markets into account.
For the full story on factors influencing interest rate predictions, visit Mortgage Interest Rates Predictions.