With interest rates at record lows over the past year, theres really only one way for them to go, the only question is when. Most experts agree that rates will remain fairly stable in the short term, at least until the end of the year, and some believe they will even decrease slightly. However, the prospect of a sharp increase in 2005, continuing into the following year will have many mortgagees feeling uncomfortable.

Those most at risk when rates begin to rise again will be borrowers who have been over eager to buy in to the mortgage market while rates were low, without taking the time to secure the best possible deal, or to consider their position in the long term. The low interest rate environment has been ideal for aggressive, unscrupulous lenders to encourage customers to borrow more than they need, or agree to repayment plans they cant realistically afford, particularly when rates begin to rise again. Being in a hurry has also meant many people have been less careful about checking terms and conditions of the loans they are agreeing to. To make matters worse, many homebuyers have been swayed by low interest rates into paying too high a price for their property.

Some financial experts believe interest rates will remain low long enough for an adjustable rate mortgage to continue to be an attractive option, but borrowers will need to be quick. With rates set to rise, an ARM would seem an irrational choice, but this type of loan is still surprisingly popular. Overall rates for this type of loan are generally lower than rates for fixed term mortgages, and for those planning to pay off the loan in a reasonably short time, the remaining period of very low interest rates will still be an advantage. Many experts also believe its still not too late to take advantage of low rates to refinance a home loan package. The key for borrowers is to keep their cool when negotiating a deal, read the fine print, and think about the long term picture.