Kiss those 3.3% mortgage rates goodbye

As 30-year fixed home loans near 4%, the chances of going back to historic lows are fading quickly.

By Jason Notte Jun 6, 2013 1:56PM
 Miniature home on sheet of percent signs (© Comstock/Getty Images)Remember last winter when buyers with sterling credit and a down payment of more than 20% could breeze their way into a 30-year fixed-rate mortgage with a 3.3% interest rate? Yeah, that's over.

This week, the average rate on that mortgage jumped 10 basis points to 3.91%, according to mortgage company Freddie Mac. That's a level unseen since April 2012. And judging by the reactions of economists, it's a rate that's going to be a steal compared with what homebuyers will see in the near future.

Why? At least partly because some people don't learn. When house flipping became a trend again, even though the practice helped torpedo the housing market and bring on a recession, it was only a matter of time until someone questioned why rates were still so low.

The Federal Reserve, which is spending upwards of $85 billion a month buying Treasury bills and mortgage-backed securities to keep rates down, is now considering halting that practice as soon as September, according to CNNMoney. That would mean private investors would have to make those purchases, which in turn means higher rates to attract those investors.

Also, though consumers and job hunters may not feel the economy is so steady right now, lenders feel that it has been quite a while since the recession ended and that recent improvements justify a rate increase. With the nation adding jobs by an average of 202,000 a month and both home sales and prices rising, even lukewarm news can push 30-year mortgage rates closer to 5.23%, which CNNMoney notes was a 37-year low when it first appeared in 2003. Historically, that rate averages about 5.5% or higher.

Investment property buyers and house flippers -- now accounting for more than 20% of the overall housing market -- aren't the only ones using current low rates to their advantage. Those rates are also making it a lot easier for new homebuyers to get more for their money and for sellers to get prices that keep them above water.

But with factors like bloated student loan debt already keeping potential first-time buyers out of the market, jacking up rates won't exactly add incentive. And with housing inventories hovering around a 4.5-month supply -- versus a more typical six-month stockpile -- and homes that took 100 days to sell a year ago leaving the market in little more than 60 days now, the foundation for reduced mortgage rates is buckling.

More on moneyNOW


Jun 6, 2013 3:40PM
Good.  I hope other interest rates increase as well.  Can we finally start rewarding savers instead of spenders?  It would be nice to earn more than .75% on a savings account.
Jun 6, 2013 3:41PM
My house will be paid for in 5 years. thats better than any % rate
Jun 6, 2013 3:36PM
The recession (really a depression) is over? When did this happen? Fool me once, fool me twice...
Jun 6, 2013 4:02PM

Yes and KISS those houses GoodBYE!   Banks can have all those empty rotting houses that no one can afford to live in!   Friend of mine makes 60k a year and has excellent credit (780) and can not get a mortgage beyond 130K.   You can't buy anything decent in NJ for 130K unless you want a condo with $375 dollar condo fees!   The house market is heading for another bust!  HOW DO I KNOW?

Just as I knew the first BURST was coming.  The prices are too high!  Who the hell can afford a 200K mortgage?  Answer:  young people...and they are either unemployed or trying to pay 100K student loans?

Housing prices need to adjust...WAY DOWN!   wages are stagnent and unemployment is still HIGH.

Honest ...What has really changed in 3 years....answer:  NOTHING!!!!

Jun 6, 2013 4:14PM
screw a mortgage I bought a tent and a goat   yeee haw  
Jun 6, 2013 4:14PM
WTF??? Mortgage int rates should be 5-7% with 20% down a 750 credit rating and be on a job to pay for it for at least 1.5 yrs ! BOTTOM LINE... These investors on wll street are idiots . They got used to the cheap money from the FEDs... Its time to give the savers a good int rate on our money ! I want my home value back ... And so does the rest of America who did everything right , never late ! And still paying their mortgage and never walked away.. For the people who did that screwed the home owners like me , screw you people !
Jun 6, 2013 2:24PM
I bought my first house in 1999 it had a 7% interest rate.  Sold it in 2002, bought another one got 6.5% and thought that was the deal of the century.  Listen, sub 5% is awesome.  Remember the late 1980's?  17%, 21%??  It's not like 3.9% is bad, its only going to change your payment about $85 on a $250,000 loan.  Not like that $85 is going to make or break someone.  Sure that's quite a bit of money, but I don't think it's going to change the affordability factor for most.
Jun 6, 2013 3:44PM
Glad I locked in a 2.65% 15-year two months ago!
Jun 6, 2013 3:40PM

Oh spare me the histrionics.  My husband and I bought our first house in 1981 and we took out an adjustable rate mortgage at the great rate of 13.5%.  A fixed rate mortgage ran about 18% at the time. 


Our second house was at 11%.  The third at 8.5%.  We managed just fine and will retire with a nice portfolio.  You just have to want it bad enough.

Jun 6, 2013 3:05PM
We need to get back to normal. This is just one step in that direction. I'm afraid though, what we will get won't be normal. It will be the high extreme instead of the low extreme we have had.
Jun 6, 2013 6:05PM
Having no mortgage is the ultimate investment. Pay off the house early by making double payments like I am on a 15 year mortgage and then bank or invest the cash (I bought land in the mountains to build on and retire). Then sell or rent your paid off house. Just have to not want to keep up with the joneses by buying new cars every 2 years and living beyond your means
Jun 6, 2013 4:14PM
Wait and see !!  Rates will drop again and even lower than before. Helicopter Ben will not stop QE anytime soon !!   Just an OVERREACTION by a bunch of idiots !!  Another recession is around the bend, thanks to OBAMA  !!!   Just wait and see !!
Jun 6, 2013 4:08PM
watch out.  if interest rates go up and the feds can't stop it then we will have to hand over America to the Chi-Coms.  Our debt will bury us even worse.
Jun 6, 2013 2:40PM


I agree with your position. In addition to these factors is the reality that for the last four years the big banks have been making more money off of credit cards, assorted bank fees and penalties than they have from the interest on their outstanding loan portfolios. In an effort to obtain more balance to their profit base they will have to raise interest rates on loans with some intensity...and sooner than later. Thanks for your post.


Peace ~

Jun 6, 2013 5:12PM
OMG...interest rate at horrible.  When we bought our house in 1984, we locked in at 12.5%!!!  Refinanced a few years down the road at 6.725% and thought what a great deal we made! So, take advantage if you can.  They have nowhere to go but up. 
Jun 6, 2013 3:23PM
My first house had an 11.75% 30 year fixed mortgage rate.  And my fico score was 800.
Jun 6, 2013 2:50PM
I just bought my first home in April and got a 3.25% rate, sure am glad I was able to go ahead and purchase then. I have two co-workers who are looking to buy and they're starting to worry about the rates.
Jun 6, 2013 4:32PM
Any significant jump in interest rates would make the Chinese "jump" for joy in anticipation of the increased debt service on our National Debt. Oh well, I guess a lot of the new "social programs" will be junked and a lot of the old ones won't be increased. 
Jun 6, 2013 2:37PM

Those low interest rates will depress the new home market for years to come. Who will   give up that low interest rate and build a new house when the rates go up? Only first time buyer who normally buy bottom of the line homes and people who move will be in the market, oh and those bastardly rich people.

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