Homebuyers, beware: Mortgage rates are rising
Concerns about the Federal Reserve possibly slowing its stimulus efforts have helped push the cost of home loans to their highest level in a year.
Tuesday's good economic news about the housing market recovery -- with home prices surging at the fastest pace in about seven years -- was tempered by a jump in mortgage rates, with averages reaching a 12-month high, according to the Mortgage Bankers Association.
So with all the buzz about housing's revival, why are mortgage rates rising? Lenders are boosting them because of concern that the Federal Reserve could decide to slow its stimulus policies, which have kept interest rates near record lows.
"Mortgage rates increased to their highest level in a year," MBA research executive Mike Fratantoni said in the group's newsletter. "Rates rose in response to stronger economic data and an increasing chance that the (Federal Reserve) may soon begin to taper their asset purchases."
The average contract interest rate for 30-year fixed-rate terms rose to 3.9%. While that's still well below historic norms, it's the highest rate since May 2012. And it has led to a drop in home-loan and refinancing applications, the MBA notes.
The Fed currently purchases about $85 billion a month in mortgage-backed bonds, Reuters says. That has kept rates much lower than they would have been otherwise, and it has helped spur demand in the housing market by making borrowing more affordable. It also lures current owners into refinancing at lower rates.
If higher rates put a damper on homebuyers' newfound enthusiasm, that could eventually mean slower sales for homebuilders such as D.R. Horton (DHI) and Toll Brothers (TOL). As reported Wednesday, the shares of homebuilders have posted big gains this year.
Follow Aimee Picchi on Twitter at @aimeepicchi.
These people today would be storming the WH screaming for freebies and cheap money
All done now Regalman.
She's got a HUGE jew nose , kind of impedes the action but she has experience from her middle school years !
Quite the dog though
I just tried the refinance process. What a joke. I literally had to explain any and all monetary transactions over $200. This on a home valued over $600k, and mortgage balance less then $445k. Excellent credit rating. Not taking any money out. Refi was to shorten length of loan, and get a lower interest rate. A much more secure loan all the way around. Lower interest rate means more goes to principal, shorter time frame also allows equity to build quicker. The refi company realized this was not a big money maker for them, so they have done all they can to derail the process. Then they claim the government is making them be this difficult.
Yet a friend went thru a refi, and did not have the same ridiculous issues I did. The difference, they are taking cash out. Going over 80% LTV so that they have to pay PMI to the bank. They are doing 30 years, and paying a higher interest rate. Their house is modest in comparison to mine. Their income has actually gone down in recent years, and their credit score is not as good.
So this is just about the banks maximizing profits, not being fair to consumers.
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