May began with mortgage rates hovering in record low territory.  Rates for conforming 30-year, fixed-rate mortgages appeared to be firmly entrenched below five percent.  With massive government intervention and a global recession, it appeared to many that rates would remain below 5% for at least a few months.  However, as talk of a potential depression waned, hints of economic reminded us that mortgage rates cannot stay low forever.  For many on-the-fence buyers and those waiting for rates to dip even lower to refinance their homes, there is a reasonable chance that they have missed the opportunity of a sub-5%, 30-year, fixed-rate mortgage.  Of course, compared to historical standards, rates are still amazing low and may be for some time.

There is certainly no question that we are in one of the longest and deepest recessions since WWII.  The economy continues to shrink, with all sectors of the economy struggling.  Many experts had assumed that the economy would continue to get worse for the remainder of this year.  However, economic news this month began to show signs that the rate of contraction may be slowing.  Many analysts and government officials began predicting that economic recovery might begin before the end of the year.  While it is certainly good news that we may be near the end of this economic tailspin, those historically low mortgage rates may be behind us now.  However, as the economy improves, there is significant potential for very positive news from the mortgage industry.  Assuming that the economy does turn around, we should see the rate of foreclosures also scaling back.  An improved economy and a reduced risk of foreclosure should begin to help the industry loosen underwriting standards that have become extremely restrictive for even high-quality mortgage shoppers.

So have we entered a period of ever climbing mortgage rates?  The answer is probably not.  The path to economic recover will have bumps along the way.  Signs that reveal continued economic weakness will help push mortgage rates down slightly, but it is unlikely that rates will return to historically low levels.  Please be advised that every data point that hints at economic recovery will provide significant upward pressure on rates.