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Look for home loan interest rates to continue upward creep

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Real Estate

Interest rates for a conventional 30-year, fixed-rate home loan have increased fairly steadily from 3.34 percent at the beginning of the year to about 3.60 percent, but they are not expected to surge upward, experts said.

Fannie Mae and Freddie Mac, the National Association of Realtors and other industry leaders generally agree that, unless a surprise comes along, rates probably will stay under 4 percent for the rest of 2013 and then inch up to about 4.5 percent in 2014.

In a joint interview, Rick Sharga, executive vice president of Carrington Mortgage Holdings, and Tom Shaw, vice president of marketing for Carrington Mortgage Services, said Federal Reserve Chairman Ben Bernanke has been straight forward about intending to hold monetary policy steady as long as unemployment remains above 6.5 percent.

Even with a sudden surge in job creation, the Fed wouldn't just flip a switch and rates would jump, said Shaw. "Their policy of quantitative easing is something that would be exited gradually, meaning rates would also rise slowly."

The two agreed that "g-fees," premiums charged by the government-sponsored enterprises Freddie Mac and Fannie Mae, and by the Federal Housing Administration, for guaranteeing loans, should be of more concern to buyers than any increase in rates.

The fees have been raised several times in the past two years and are slated to go up again, to recoup losses arising out of the housing crisis, make the government operations more competitive and encourage private lenders to come back into the market.

Rates have a dwindling impact on real estate sales in the area, said Bradley Boland, an associate broker at Keller Williams Realty in Reston and president-elect of the Virginia Association of Realtors. Inventories of available houses are tight, he noted, and "people are less concerned about rates than actually finding a house."

Boland said there is no move-up market because so many people who own lower- and mid-priced houses are underwater and cannot sell them.

"Not many people can bring thousands of dollars of additional money to the table to pay off their mortgage when they sell," he said. "Interest rates are really about third on the list of things people are worried about."

Boland said the low interest rates actually may be hampering sales. "The signals people are getting from the government indicate that interest rates are going to remain low for a while -- and there is no guidance about what 'for a while' means," he said. "This could be causing buyers to remain on the fence. Maybe if they had a clear signal that rates were about to go up, they would get moving."

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