The Associated Press reported today that economists expect low rates will continue over the coming months but warned that by next summer, they may start to rise — and rise steeply. And this includes mortgages, which are currently in the 5’s but who knows how high they will if this scenario unfolds.

The report quoted Carl Walsh, a University of California economist, as saying that interest rates will need to be “increased aggressively.”   Walsh relayed that message to the Federal Reserve in a paper he presented at the annual Fed conference this past week. “Committing to a gradual increase in the policy rate is not justified,” he said.

How, when and by how much to increase rates —- and thereby attract bond investors and others with high enough yields — to pay for the trillions it has pumped into the economy has been a hot topic at these Fed meetings.

And, if the economy does start to rebound and rates stay at the current low levels, people may going into overdrive, borrowing and spending like mad and increasing inflationary pressures.  But raise rates too soon, and — kerplunk — the economy falls back into the abyss.

Ah, what to do??

That, is the answer we’re waiting for… We will keep watching for hints of not whether, but when the rate tsunami will roll in. Meanwhile, those of you with ARM mortgages coming due in the next three or four years should take a look at whether you should lock in to a low fixed rate while you can.