Can you still get a 5% mortgage?

There's still time to get a 5% mortgage -- but the window is closing.

On April 1, the government will stop buying mortgage-related debt, which will send interest rates slowly higher

Since November 2008 the Federal Reserve has snapped up $1.25 trillion worth of mortgage-backed securities -- essentially, people's mortgages bundled together and sold to investors.

The program has kept interest rates artificially low over the past year, with the price of a 30-year fixed-rate loan ranging between 4.93% and 5.09%, according to mortgage giant Freddie Mac.

That's about 0.4 percentage points lower than these loans would have been without the government's intervention, according to Jay Brinkmann, chief economist for the Mortgage Bankers Association.

But when the Fed stops buying and cedes the playing field to private investors, they will almost surely demand better return for their risk.

"Rates are going to be higher than they are now," said Brinkmann.

How much higher is the question.

"It's really hard to tell right now," said Amy Crews Cutts, Freddie Mac's deputy chief economist. "The Fed said it will taper off [purchases] gradually. Each week they buy less than the week before."
Danger! Falling home prices

So far, though, the tapering has failed to spawn higher rates. Last week, the 30-year was just 4.96%.

Still, all of the experts agree that mortgage rates will climb. The good news is that none of them think the increase will be very large.

Their projections are for a gradual run up to between 5.5% and 6% by December. Brinkman's projection is a rise to 5.8%; Cutts is to 5.75%.

That will add only about $70 to the monthly payment on a $150,000 note. That's still very reasonable and should not discourage many consumers.

Homebuyers may even find themselves paying less every month as housing markets continue to experience price declines.

Industry experts are projecting further home price drops of 5% to 10%. That would wipe out every bit, and more, of the monthly payment increases higher mortgage rates would bring.