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Residential Finance: Rates Likely to Rise, but Not for Long

Those who thought they missed their opportunity to take advantage of record-low mortgage rates after last week's unemployment report may not want to let go of hope just yet, according to ""Residential Finance Corp."":http://www.residentialfinance.com/index.cfm

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In its latest Mortgage Market Review, RFC predicted that the September's decrease in unemployment and increase in jobs created will cause a slight, short-term uptick in mortgage interest rates.

However, with growth still sluggish, RFC anticipates that the jobs report will not affect the Federal Reserve's recent commitment to purchase $40 billion of mortgage-backed securities for the foreseeable future.

""The economy is not showing a significant enough improvement, making these asset purchases critical to helping the industry, and economy, moved forward,"" said Barry Habib, chief market strategist at RFC. ""The expected short-term volatility and rate increase will be just that-short term-as we expect to see rates settle back to current lows driven by the Fed's asset purchases.""

Habib added that the decrease in unemployment is not likely to have any meaningful impact unless it proves to start a trend ""with improved continued improvements over another two-to-three months.""

However, even with rates expected to return to their lows, Habib encouraged homeowners not to sit on the fence too much longer, as a continued downward trend in unemployment will see rates rise further. Homeowners waiting to refinance would do well to start that process in the next few months.

""For those who haven't yet locked in a rate-there is still time,"" Habib said. ""We actually expect long-term rates will likely continue to move lower in the future due to the continued asset purchase and the commitment to keep the Fed Funds rate low.""

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